(a) State any four sources of capital for a public limited company. (b) Explain any four advantages and disadvantages respectively of converting a business ...

(a) Four sources of capital for a public limited company

1. Sale of shares: Issuing ordinary and preference shares to the public who then become part-owners.
2. Issue of debentures: Borrowing long-term funds from the public through debentures on which fixed interest is paid.
3. Ploughed-back (retained) profits: Undistributed profits kept in the business and used to finance expansion.
4. Bank loans and overdrafts: Borrowing from commercial and development banks.

Other sources include trade credit from suppliers and mortgages on property.

(b) Four advantages of converting a business into a public limited company

1. It can raise very large amounts of capital by selling shares to the general public.
2. Shareholders enjoy limited liability, so their loss is limited to the amount they invested.
3. It has continuity (perpetual succession) and is not affected by the death or withdrawal of any member.
4. Its large size allows it to enjoy economies of scale and employ specialist managers.

Four disadvantages

1. Formation is expensive and involves many legal formalities and documents.
2. Its accounts must be published and audited, so it loses privacy in its affairs.
3. Decision making is slow because of its large size and the many people involved.
4. There is separation of ownership from control, which may lead to conflict of interest and less personal attention.