Question

Rahul Aggarwal is working as a CEO in a reputed company having head office in Mumbai. The company is
following a dynamic approach and thus keeps launching innovative products in the market. He know that me
shares of his company are not freely transferrable. The company is also concerned about its employees and is
offering them good working conditions along with other non-financial benefits. Rahul is concerned about
education of children living in slums of Mumbai and thus he is planning to donate 4% of his companies profit for
their education. As the company was able to earn good profit it has declared a dividend of 10% for its
shareholders and transferred residual profits in reserve.
On the basis of the given information, answer the following questions:
(a) Name the type of company mentioned in the above case.
(b) State any two demerits of company form of business organisation.
(c) Identify any two values which the company is trying to communicate to the society.​

Answer 1

(a) It is not explicitly stated in the given information what type of company is mentioned. However, it is mentioned that the company has shareholders and has declared a dividend, which suggests that it may be a publicly traded company, such as a corporation.

(b) Two demerits of the company form of business organization are:

• Limited liability: In a company, the shareholders' liability is limited to their investments in the company. This means that if the company incurs debt or faces legal action, the shareholders' personal assets are protected.
• However, this limited liability can also be a demerit as it may encourage irresponsible behavior from shareholders and management, who may not have as much personal stake in the success or failure of the company.
• Complexity and cost: Forming and maintaining a company can be complex and costly, as it involves complying with various legal and regulatory requirements, such as preparing and filing articles of incorporation, holding shareholder meetings, and preparing financial reports.

(c) The company is trying to communicate two values to the society:

• Social responsibility: The company is concerned about the education of children living in slums and is planning to donate a portion of its profits towards this cause. This demonstrates a sense of social responsibility and a desire to contribute to the well-being of the community.
• Employee well-being: The company is offering its employees good working conditions and non-financial benefits, which suggests that it values the well-being and satisfaction of its employees. This may help to create a positive work culture and enhance employee loyalty and productivity.

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