Question

Write Short notes on the following:
Advantages of a Joint Stock Company.

Answer 1

1. Large capital: A company can secure large capital compared to a sole trader or partnership. A large amount of capital is necessary for conducting business on a large scale.

2. Limited liability: The liability of a shareholder is limited. The risk of loss is limited to the unpaid amount on the face value of shares held.

3. Transferability of shares: Transaction of Shares between two individuals are easy. So there is the liquidity of investment.

4. Economies of large-scale operation: A joint-stock company can undertake business on large scale. As a result, it can derive all the advantages of large-scale production.

5. Economic development: Joint Stock Companies have large financial resources, they are able to undertake large-scale production, satisfy the needs of more consumers, create large-scale employment opportunities, promote balanced regional development and contribute substantially to the government by way of taxes.