IGCSE Economics Paper-2: Specimen Questions with Answers 69 - 70 of 100

Passage

As a result of the government strategy, public sector had come to occupy a monopoly of dominant position in basic and heavy industries.

Question 69 (3 of 5 Based on Passage)

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Short Answer▾

Are private companies listed on the stock market?

Explanation

A firm held under the private ownership is referred to as a private company. A private company can issue stock and may have shareholders but it is not supposed to list or trade its shares on public stock exchanges and is not offered for trade through initial public offerings (IPO) . Due to which a private company is not required to fulfill the requirements of the Securities Exchange Commission (SEC) . On the other hand, a public company is supposed to strict filling. The shares of private companies are less liquid and are difficult for valuation.

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Question 70 (4 of 5 Based on Passage)

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Short Answer▾

Which company is better public or private?

Explanation

The Ways in Which Public Companies Are Better Than Private Companies Are

  • Large amount of capital can be raised by the public company by selling stock or bonds. On the other hand, private companies cannot do so. They rely on private funds to raise capital.
  • Transparent finances of the public company have an advantage over the private firms. Owing to strict legal rules and laws public companies must disclose their financial reports and statements which gives the shareholders greater knowledge of the firm՚s health and financial status.
  • In a public company it is easier to transfer the shares.
  • Public company owners are at less risk. In private companies ‘shareholders are at greater risk because the shareholders’ funds the assets of the firm. The owners of the public company are at better position from bad debts, loss, or bad performance by any of the party.
  • Corporate governance standards of public company are transparent. Public company shareholders can exercise control over the management and can elect or remove directors. The management of a public company is not limited to few persons but it is a democratic one.

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