(a) State five features of a public corporation
(b) list and explain five sources of capital available to a limited liability company
Explanation
(a) Features of Public Corporation
(i) It is created by an Act of parliament.
(ii) It is controlled by government
(iii) It is managed by a board of directors appointed by the government.
(iv) It provides essential services at affordable prices
(v) it is not profit oriented.
(vi) It is financed by government subsidies/grants/subvention
(vii) it is a legal entity that can sue and be sued.
(viii) It require large capital outlay
b(i) Sources of capital to limited liability companies:
(i) Shares.
(ii)Debentures
(iii) Plough back profit/Retained earnings
(iv) Bank loans
(v) Bank overdrafts
(vi) Trade credits
(vii) Government tax holidays
(viii) Leasing
(ix) Hire purchase
(x) Debt factoring
(xi) Sales of assets.
b(ii) Explanation of sources capital available to limited liability company:
(i) Shares: Shares constitute part ownership (capital) of a company. They are given in units with quoted monetary value (price) to the public to subscribe. Shares could be ordinary or preference depending upon how the company wants the share capital to be constituted.
(ii) Debentures: These are loans carrying fixed rate of interest that are payable whether a company makes profits or not. The interests are paid before payment of dividend on shares. A written agreement of indebtedness with terms and conditions under the company's seal serves as guarantee/It is a secured loan.
(iii) Plough back profit/Retained earnings: The profits of a company may be reinvested rather than being distributed to shareholders in form of dividend.
(iv) Bank loans: These are large amounts of funds which are raised from commercial banks and investment institutions which attracts interest. Such loans carry collateral security as a guarantee.
(v) Bank Overdrafts: These are credit facilities granted to a limited liability company operating current account to withdraw money over and above their bank balance for immediate use,
(vi) Trade credits: This refers to the supply of goods by manufacturers arid wholesalers for which payment is made at a later date or after the sale of the goods.
(vii) Government tax holidays: Government provides relief in the form of nonpayment of taxes for some periods.
(viii) Leasing: A company hires equipments, machinery and land in lieu of outright purchase and pays rent as agreed. Thus it enables a company to employ asset without having to tie up large amount of capital for a long period.
(ix) Debt factoring: This is taking over Of trade debts by an intermediary called a factor, Factoring provides the seller of the debts with prompt payment. (it is called forfeiting in international trade)
(x) Sale of Assets: A company may dispose off some of its assets to raise funds.
(xi) Hire purchase: Companies in need of funds to acquire capital assets may get them through installment payment agreement.