(a) Define joint venture. (b) Identify any three merits of a private company over a partnership. (c) State any three sources of finance to a public enterpri...
(b) Identify any three merits of a private company over a partnership.
(c) State any three sources of finance to a public enterprise.
a) A joint venture is a business arrangement where two or more parties come together to undertake a specific business project or venture. The parties involved in the joint venture share the costs, profits, and losses of the project.
b) Some merits of a private company over a partnership include:
1. Limited liability: A private company is a separate legal entity from its owners, meaning that the owners have limited liability for the company's debts and obligations. In a partnership, the partners have unlimited liability, which means that they are personally responsible for the partnership's debts and obligations.
2. Perpetual existence: A private company has perpetual existence, which means that it can continue to exist even if the original owners die or sell their shares. In contrast, a partnership dissolves when one of the partners dies, retires, or withdraws from the partnership.
3. Ease of raising capital: A private company can raise capital by issuing shares to investors, which is a more straightforward process than raising capital in a partnership. In a partnership, the partners must contribute their own capital or borrow from banks or other lenders.
c) Three sources of finance for a public enterprise include:
1. Equity financing: This involves selling shares of the company to investors in exchange for capital. Equity financing allows the public enterprise to raise large amounts of capital without incurring debt. Investors who buy shares in the company become part owners and can earn returns on their investment through dividends or by selling their shares at a profit.
2. Debt financing: This involves borrowing money from banks or other lenders and paying back the loan with interest over time. Debt financing is a common source of finance for public enterprises, especially for capital-intensive projects such as infrastructure development.
3. Grants and subsidies: Public enterprises may also receive grants and subsidies from government agencies or other organizations. Grants and subsidies are usually provided for specific purposes, such as research and development, environmental protection, or social welfare programs. Unlike loans, grants and subsidies do not need to be repaid, which makes them an attractive source of finance for public enterprises.
a) A joint venture is a business arrangement where two or more parties come together to undertake a specific business project or venture. The parties involved in the joint venture share the costs, profits, and losses of the project.
b) Some merits of a private company over a partnership include:
1. Limited liability: A private company is a separate legal entity from its owners, meaning that the owners have limited liability for the company's debts and obligations. In a partnership, the partners have unlimited liability, which means that they are personally responsible for the partnership's debts and obligations.
2. Perpetual existence: A private company has perpetual existence, which means that it can continue to exist even if the original owners die or sell their shares. In contrast, a partnership dissolves when one of the partners dies, retires, or withdraws from the partnership.
3. Ease of raising capital: A private company can raise capital by issuing shares to investors, which is a more straightforward process than raising capital in a partnership. In a partnership, the partners must contribute their own capital or borrow from banks or other lenders.
c) Three sources of finance for a public enterprise include:
1. Equity financing: This involves selling shares of the company to investors in exchange for capital. Equity financing allows the public enterprise to raise large amounts of capital without incurring debt. Investors who buy shares in the company become part owners and can earn returns on their investment through dividends or by selling their shares at a profit.
2. Debt financing: This involves borrowing money from banks or other lenders and paying back the loan with interest over time. Debt financing is a common source of finance for public enterprises, especially for capital-intensive projects such as infrastructure development.
3. Grants and subsidies: Public enterprises may also receive grants and subsidies from government agencies or other organizations. Grants and subsidies are usually provided for specific purposes, such as research and development, environmental protection, or social welfare programs. Unlike loans, grants and subsidies do not need to be repaid, which makes them an attractive source of finance for public enterprises.