(a) Explain the following terms: (i) goodwill (ii)... | WAEC SSCE - Commerce - 2009 (Essay)

Question 1 Report

(a) Explain the following terms:
(i) goodwill
(ii) patents
(iii) trade mark
(iv) copyright

(b) State four factors that could lead to the dissolution of a limited liability company

Answer

(a) Explanation of terms

(i) Goodwill: Goodwill is an intangible asset representing the good reputation, established customer base and business connections that a firm has built over time. It is the extra value a buyer is willing to pay for a business above the value of its net tangible assets, because the business already enjoys a steady flow of customers and earning capacity.
(ii) Patents: A patent is a legal right granted by the government to an inventor giving him the exclusive right to make, use and sell his invention for a fixed number of years. It prevents other people from copying or exploiting the invention without the inventor's permission.
(iii) Trade mark: A trade mark is a distinctive name, symbol, logo or sign registered and legally protected, which a manufacturer uses to identify and distinguish his products from those of competitors. It helps customers recognise the origin and quality of goods.
(iv) Copyright: Copyright is the exclusive legal right given to the author or creator of an original literary, artistic, musical or intellectual work to reproduce, publish, sell or perform the work for a stated period. It protects the work from being copied without permission.

(b) Four factors that could lead to the dissolution of a limited liability company

Court order (winding up by the court): The court may order the company to be wound up where it is unable to pay its debts, or where it is just and equitable to do so.
Insolvency or persistent losses: When the company becomes insolvent and can no longer meet its financial obligations to creditors, it may be dissolved.
Special resolution by members: The shareholders may voluntarily pass a special resolution to wind up the company, for example when the objective for which it was formed has been achieved or is no longer profitable.
Completion of purpose or expiry of period: Where the company was formed for a specific purpose or for a fixed period stated in its articles, it is dissolved once that purpose is completed or the period expires.

Other acceptable factors include reduction of members below the legal minimum, and merger or amalgamation with another company.

Answer Details

(a) Explanation of terms

(i) Goodwill: Goodwill is an intangible asset representing the good reputation, established customer base and business connections that a firm has built over time. It is the extra value a buyer is willing to pay for a business above the value of its net tangible assets, because the business already enjoys a steady flow of customers and earning capacity.
(ii) Patents: A patent is a legal right granted by the government to an inventor giving him the exclusive right to make, use and sell his invention for a fixed number of years. It prevents other people from copying or exploiting the invention without the inventor's permission.
(iii) Trade mark: A trade mark is a distinctive name, symbol, logo or sign registered and legally protected, which a manufacturer uses to identify and distinguish his products from those of competitors. It helps customers recognise the origin and quality of goods.
(iv) Copyright: Copyright is the exclusive legal right given to the author or creator of an original literary, artistic, musical or intellectual work to reproduce, publish, sell or perform the work for a stated period. It protects the work from being copied without permission.

(b) Four factors that could lead to the dissolution of a limited liability company

Court order (winding up by the court): The court may order the company to be wound up where it is unable to pay its debts, or where it is just and equitable to do so.
Insolvency or persistent losses: When the company becomes insolvent and can no longer meet its financial obligations to creditors, it may be dissolved.
Special resolution by members: The shareholders may voluntarily pass a special resolution to wind up the company, for example when the objective for which it was formed has been achieved or is no longer profitable.
Completion of purpose or expiry of period: Where the company was formed for a specific purpose or for a fixed period stated in its articles, it is dissolved once that purpose is completed or the period expires.

Other acceptable factors include reduction of members below the legal minimum, and merger or amalgamation with another company.

(a) Explain the following terms: (i) goodwill (ii) patents (iii) trade mark (iv) copyright (b) State four factors that could lead to the dissolution of a li...