Explain the following terms: (a) fixed assets (b) certificate of trading (c) dividend (d) authorized capital (e) promoters

Answer Details

Explanation of terms

• (a) Fixed assets: These are assets of a permanent or long-term nature that a business acquires not for resale but for use in running the business over a long period, for example land, buildings, machinery, motor vehicles and furniture.
• (b) Certificate of trading (certificate to commence business): This is a document issued by the Registrar of Companies to a public limited company, after it has met the required conditions such as raising the minimum subscription, which entitles it to begin business and to borrow. A private company does not need it.
• (c) Dividend: This is the portion of a company's profit that is distributed to its shareholders as a reward for investing in the company, usually expressed as an amount per share or as a percentage of the nominal value of the shares.
• (d) Authorized capital (registered or nominal capital): This is the maximum amount of capital that a company is permitted by its memorandum of association to raise through the issue of shares. The company cannot issue shares beyond this amount unless it is legally increased.
• (e) Promoters: These are the persons who conceive the idea of forming a company and take all the necessary steps to bring it into existence, such as preparing the formation documents, raising initial capital and registering the company.