Commercial Applications
Why are joint stock companies better suited for large-scale production than partnerships?
- Joint ownership of property.
- Larger capital resources and professional management.
- Direct involvement of shareholders in management.
- Fewer legal requirements for incorporation.
Answer
Larger capital resources and professional management.
Reason — Joint stock companies are better suited for large-scale production than partnerships because they can accumulate huge amounts of capital by issuing different types of securities to a large number of investors. A public company can have an unlimited number of members and sell shares to them. In addition, companies can employ highly qualified experts in different areas of business management, which improves the efficiency of business operations and facilitates large-scale operations.
Related Questions
A shareholder in a public company transfers all their shares to a competitor, leading to significant changes in company control. The board of directors raises concerns about the implications. What feature of public companies allows such an event to occur?
- Transferability of shares
- Perpetual succession
- Limited liability
- Common seal
Directors in a joint stock company are personally liable for all debts incurred by the company.
- True
- False
A company provides its members with limited liability but requires them to contribute a specified amount in case of winding up. What type of company is this?
- Company Limited by Guarantee
- Unlimited Company
- Private Company
- One Person Company
Statement I : The capital share of a company is generally divided into a large number of shares of small value.
Statement II : These shares can only be bought by noble people of the society.
- Only I is correct
- Only II is correct
- Both I and II are correct
- Both I and II are wrong