(a) State five features of a public corporation (b) list and explain five sources of capital available to a limited liability company

Answer Details

(a) Five features of a public corporation

1. Owned by the government: A public corporation is established and owned by the state on behalf of the public.
2. Created by an Act of Parliament (statute): It is set up by a special law which states its aims, powers and duties.
3. Separate legal entity: It has a legal personality of its own; it can sue and be sued, own property and enter into contracts in its own name.
4. Capital provided by the government: Its funds come mainly from government grants, loans and its own internally generated revenue rather than from shareholders.
5. Service (rather than profit) motive: Its main aim is to provide essential services to the public, though it may also aim to break even or make a modest surplus.

(Management by a board appointed by the government and public accountability are also acceptable.)

(b) Five sources of capital available to a limited liability company

1. Issue of shares: The company raises capital by selling ordinary and preference shares to the public who become part-owners.
2. Issue of debentures: It borrows long-term funds from the public by issuing debentures on which fixed interest is paid.
3. Bank loans and overdrafts: It obtains short- and medium-term finance from commercial banks.
4. Ploughed-back (retained) profit: Part of the company's profit is kept in the business as reserves and used for expansion.
5. Trade credit: The company obtains goods and materials from suppliers on credit, paying at a later date.

(Leasing/hire purchase and loans from finance houses are also acceptable.)