Question 1

The type of company that has the right to raise money from the general public is a:

Accepted Answer

Only a public company has the right to raise money from the general public by issuing shares to them. Proprietary and private companies cannot do so. Therefore, option B is the correct choice.

Question 2

Which of the following is not a rule in the framework used for monitoring and controlling the behaviour of company directors?

Accepted Answer

Subjectivity is not a rule in the framework used for monitoring and controlling the behaviour of company directors. The other options - disclosure, fairness, and accountability - are important aspects of the framework to ensure ethical and responsible behavior by company directors.

Question 3

The shareholders that are eligible to vote for the board of directors of a company are:

Accepted Answer

Only shareholders holding voting shares are eligible to vote for the board of directors. Preference shareholders typically do not have voting rights. The number of shares held or attendance at the annual general meeting does not determine eligibility to vote.

Question 4

Which type of company operating under the Corporations Act must have the words Proprietary Limited (Pty Ltd)after its name?

Accepted Answer

A company operating under the Corporations Act that must have the words Proprietary Limited (Pty Ltd)after its name is a proprietary company.

Question 5

The main stock exchange in Australia is the:

Accepted Answer

The ASX (Australian Securities Exchange) is the main stock exchange in Australia. NASDAQ is a stock exchange in the United States, DAX is the main stock index in Germany, and ASIC (Australian Securities and Investments Commission) is the regulatory body for financial markets in Australia.

Question 6

A company issued 100,000 fully paid,5% preference shares priced at $2 each.The dividend to be paid on the shares for a financial year is:

Accepted Answer

Number of preference shares issued = 100,000 
Face value of each preference share = $2 
Total value of preference shares issued = $2 x 100,000 = $200,000

As the preference shares are fully paid, the dividend will be paid on their face value. 
Dividend rate = 5% 
Total dividend payable for the year = $2 x 100,000 x 5% = $10,000.

Therefore, the correct answer is B) $10,000.

Question 7

Limited liability means:

Accepted Answer

Limited liability means that the liability of shareholders for company debts is normally limited to the amount they have paid for their shares, but if the company fails, the creditors may have to bear greater losses than if they were dealing with a non-company. While the liability of directors for company debts may also be limited, this is not the primary aspect of limited liability. Therefore, both options A and C are correct.

Question 8

The disadvantages of a company business structure include all of the following except:

Accepted Answer

Mutual agency is actually an advantage of a company business structure, as it allows each member to act on behalf of the company and bind it to legal obligations. The disadvantages of a company business structure are A, B, and C, which refer to the extensive regulatory requirements, higher establishment costs, and less management flexibility compared to other business structures.

Question 9

Which statement is untrue for private (Pty Ltd)companies?

Accepted Answer

According to the Australian Securities and Investments Commission (ASIC), as of June 2019, 99% of all Australian companies were private companies. Therefore, statement B is untrue. Statements A, C, and D are all true.

Question 10

The feature that is not a characteristic of a company is:

Accepted Answer

The statement "less government regulation than other types of entities" is not a characteristic of a company. In fact, companies may be subject to a significant amount of government regulation and oversight, depending on the industry and jurisdiction. The other three statements are all commonly associated with companies: limited liability, legal entity status, and perpetual life.

Question 11

Under the Corporations Act,a proprietary (Pty Ltd)company is restricted to a maximum of:

Accepted Answer

Under the Corporations Act in Australia, a proprietary company (Pty Ltd) is limited to a maximum of 50 non-employee shareholders.

Question 12

Jane and Jarrod have been employed by two different firms of photographers.They decide they should get together and establish their own business,called JJ Photographers.Each has decided to contribute $20,000 in cash to buy equipment,and they will rent premises in the local shopping centre.Both will work full time in the business and share profits and losses equally.They are not sure whether they should set up as a partnership or as a private company and have come to you for advice.
REQUIRED:
Explain to Jane and Jarrod the advantages and disadvantages of a partnership versus a private company structure for their new venture.

Accepted Answer

The answer of Jane and Jarrod have been employed by...

Question 13

Small proprietary companies are relieved of many of the reporting requirements to which public companies are subject.A company is deemed to be 'small' if it satisfies two of three specified criteria.Which of the following is not one of the criteria?

Accepted Answer

The criteria for a company to be deemed 'small' typically include thresholds related to assets, revenue, and the number of employees, but not specifically gross profits.

Question 14

Which of these is an advantage of a private company compared to a partnership?
i.Perpetual life.
ii.Easier transfer of ownership.
iii.Mutual agency.
iv.Limited liability.

Accepted Answer

The advantage of perpetual life means that the private company can exist indefinitely and is not dependent on the lives of its owners, unlike a partnership. The easier transfer of ownership allows for easier entry and exit of shareholders. The limited liability protects the personal assets of shareholders from the company's debts and liabilities. Mutual agency, which is a characteristic of a partnership, refers to the authority of each partner to act on behalf of the partnership, which is not necessarily an advantage compared to a private company.

Question 15

Which of these is not a consequence of the status of a company as a separate legal entity?

Accepted Answer

All the options listed (A, B, C) are indeed consequences of a company's status as a separate legal entity. This status allows a company to retain profits, obligates it to pay taxes, and grants it the right to enter into contracts in its own name.

Question 16

The legal entity is:

Accepted Answer

The answer of The legal entity is:
...

Question 17

The level of control in a company that is the highest is:

Accepted Answer

The board of directors has the highest level of control in a company as they are responsible for making strategic decisions and overseeing the overall direction of the company. They also have the power to hire and fire top executives, including the CEO. The CFO and chief accountant may have significant financial control, but they ultimately report to the board of directors. The executive officer may have significant operational control, but again, they ultimately report to and are accountable to the board of directors.

Question 18

A company issued 300,000 ordinary shares to the public,priced at $1.The shares were payable 50 cents on 1 July 2014 and 50 cents was uncalled.How much cash was due to the company on 1 July from the issue?

Accepted Answer

Since the shares were priced at $1, the total amount due from the issue would be 300,000 x $1 = $300,000. However, only 50 cents per share was payable on 1 July, which means the company would receive only 300,000 x 0.5 = $150,000 on that date. The remaining 50 cents per share would be due at a later date when the company calls for the uncalled amount. Therefore, the correct answer is A) $150,000.

Question 19

Additional regulations that may apply to limited companies (depending on their classification)do not include requirements relating to:

Accepted Answer

The regulations for limited companies may vary depending on the classification, but the requirement for a limited number of employees is not one of them. The other options listed (audit of annual reports, submission of annual reports to ASIC, and preparation of annual reports in accordance with accounting standards) are all potential requirements.

Question 20

The company 'Raider Limited' must be:

Accepted Answer

The answer of The company 'Raider Limited' must be:
...

Quiz 4: Introduction to Limited Companies