WAEC Commerce 2012 Theory — Question 2

Model answer

(a)(i) Limited liability means that the liability of the owners is limited to the capital contributed to the company. That is, in the case of winding up, the private property of the owners will not be affected. (ii) Separate legal entity: this means that the organisation is an artificial person that can sue and be sued in its name. (iii) Certificate of incorporation: this is the document issued by the Corporate Affairs Commission to the promoter of a company to indicate that the company is now a legal entity. (iv) Participating preference share: this is a type of preference share which allows the holder to share in additional dividend after the ordinary shareholders have received specific amount. (v) Ordinary share: this is the type of share in which the holders have no limit to amount they can receive as dividend even though they are the last to be settled. (b) Advantages of public corporation: - it is a going concern - it provides job opportunity to the citizen - it prevents the monopoly of the private sector - it can employ experts and expatriates - it provides essential services to citizens at a cheap price - it also participates in business to avoid the exploitation of consumers - also, to prevent the monopoly of private sector - also, some investments are so huge and have little profit but if it is essential for the sustainability of the state, the government invests in it.