(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 enterprise.
Explanation
(a) A joint venture is a form of business which is jointly owned by two or more independent firms who continue in their original business but pool their resources in another line of business.
(b)(i) A private company can raise capital more easily than a partnership. It can issue debentures or borrow more easily from banks.
(ii) The shareholders enjoy limited liability since they cannot lose more than the capital invested while in a partnership, there is unlimited liability since partners’ assets can be sold to offset business debts.
(iii) The business is a separate legal entity, the owners are different from the business in law while in partnership, the business is not a separate entity.
(iv) The business has a greater perpetual existence while a partnership can easily be dissolved.
(v) The business enjoys internal economies of scale because it operates on a larger scale than a partnership.
(c)(i) Public enterprises receive grants and subsidies from the government
(ii) They can raise funds from the capital market by issuing bonds
(iii) Business assets can be sold to raise funds.
(iv) Rents paid on properties owned by an enterprise can also serve as a source of capital.
(v) Revenue from services rendered to the public can also serve as a source of capital.
(vi) They can also buy goods on credit and make payments later.
(vii) Assets can easily be obtained from hire purchase companies.
(viii) Public enterprises can plough back profits.
(ix) They can raise loans from financial institutions.