WAEC Economics 2019 Theory — Question 5

Model answer

(a) A joint venture is a form of business jointly owned by two or more independent firms, who continue in their original businesses but pool resources together into another line of business. (b) Merits of a private company over a partnership (any three): (i) A private company can raise capital more easily than a partnership — e.g. it can issue debentures or borrow more easily from banks. (ii) Shareholders enjoy limited liability (they cannot lose more than their capital invested), whereas partners have unlimited liability and can have personal assets sold to offset business debts. (iii) The business is a separate legal entity from its owners, unlike a partnership where the business and owners are not legally separate. (iv) The business has greater perpetual existence, while a partnership can be dissolved more easily (e.g. on the death/exit of a partner). (v) The business can enjoy greater internal economies of scale, operating on a larger scale than a typical partnership. (c) Sources of finance to a public enterprise (any three): (i) Grants and subsidies received from the government. (ii) Funds raised from the capital market by issuing bonds. (iii) Sale of business assets to raise funds. (iv) Rents from properties owned by the enterprise. (v) Revenue from services rendered to the public.