Explain any five advantages of joint stock company
Answers
Answer:
Explanation:
1. Large Capital:
The outstanding advantage is that it allows vast mobilization of capital which otherwise is not possible to arrange. In a public company, there is no limit to the number of members. A very large number of people acquire interest in the company by purchasing shares.The fact that shares are transferable given an added advantage to the company for attracting greater number of people. No other form of business organisation is so well adopted in raising large amounts of capital as the Joint Stock Company.
2. Vast Scope of Expansion:
The vast capital collected by means of shares coupled with the earnings of the company contribute sufficient scope for its expansion. The company offers an excellent scope of self-generating growth. The managerial talents supported by vast finance leads to huge earnings and to ultimate expansion of the business and growth.
3. Limited Liability:
The liability of the members of the company is limited. Members cannot be called upon to pay anything more than the nominal value of the shares held by them. This encourages people who have little to save to invest money in the company, thus providing ample capital for initial outlay and expansion of the business.
4. Permanent Existence:
The life of the company does not depend on the life of its members. Law creates the company and can dissolve it. The death, insolvency or the transfer of shares of members does not, in any way, affect the existence of the company.
5. Transferability of Shares:
The shares in a company are transferable and members can transfer their shares without the consent of other members of the company. The company is listed with the Stock Exchange and hence company’s shares are readily sold and purchased. As shares are freely transferable, a shareholder can convert his holding into cash. This facility coupled with the limited liability has an encouraging investment by general public.