Explain the following terms:
(a) fixed assets
(b) certificate of trading
(c) dividend
(d) authorized capital
(e) promoters
Explanation
Explanation of some terms used in commerce:
(a) Fixed assets:
(i) These are permanent properties of the company bought not for sale.
(ii) They do not change their form in the course of production.
(iii) They are subject to depreciation.
(iv) They are used for future production.
(v) They are tangible in nature.
(vi) They can be used as collateral in mortgage.
(b) Certificate of trading:
(i) It is a document that enables a public company to commence business.
(ii) It is issued after the certificate of incorporation by the registrar of companies.
(iii) It is only issued after all Companies Act conditions have been met.
(iv) It must be obtained within one year of incorporation.
(c) Dividend:
(i) This is a share of the profit of a limited company distributed to the shareholders.
(ii) It is paid only when profits are made.
(iii) The amount payable is based on the number of shares held.
(iv) Dividends are only payable when declared by the company.
(iv) Dividends are paid through dividend warrants.
(d) Authorized capital:
(i) This is the total amount stated in the Memorandum of Association of the company.
(ii) This amount is the maximum amount of capital that a company can start business with.
(iii) It is also known as registered or nominal capital.
(iv) It can be classified into ordinary shares, preference shares, etc.
(e) Promoter:
(i) A promoter is an individual or group of people who conceive the idea of a company.
(ii) He undertakes to fulfill the legal requirements for the venture.
(iii) He can enter into pre-incorporation contract.