PLC theory

What is the main objectives of financial accounting?

Preference shareholders meaning?

Shareholders who have first claim on any profits and carry a fixed rate of interest, and also have no voting rights at the AGM

Ordinary shareholders meaning?

Shareholders who do not carry a fixed return and receive an equal share of the profits after preference shareholders have received their dividend, and they do have voting rights and AGM and can influence the Board of Directors

Share premium definition?

the amount of money that a company receives for its shares over and above their nominal value

Unappropriated profit:

Some profits are kept back for reserves, then used to replace work-out machinery or to pay shareholders a dividend in a year with expected poor profits

Debentures:

A loan to the company to raise finance over and above the selling of shares

Debenture holders:

Are secured creditors so if the company goes bust they can seize assets from the company and sell them to gain their money back, and carry an annual fixed rate of interest, they also have no voting rights

Preliminary expenses:

Intangible assets and not a business expense

Investments:

Shares purchased in another company will receive annual dividends

3 duties undertaken by a financial accountant?

3 limited liability advantages

People know the size of the risk they are taking, all they can lose is the amount they invested in the business, the risk of loss can be spread over a large number of people

3 PLC advantages

PLC is a separate entity from its owners (shareholders) and continues despite a change of shareholders, PLC can raise additional capital more easily through the issue of debentures, they enable very large amounts of equity to be gathered in one organisation

3 PLC disadvantages

Other companies can buy big blocks of shares, and there is no way of stopping them, their activities are very closely controlled by company law, when a privately owned company (e.g. a Partnership) becomes a public company (e.g. a PLC) the original owners may lose control of the company

Stepwardship function meaning

responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries

Essential info that would be recorded in a company’s Memorandum of Association

Company name, address, objects of the company, statement that the shareholders are limited, statement of the authorised equity, signatures of at least 2 members

Purpose of a company’s Articles of Association

The internal rules for running a Public Limited Company

Dividend meaning?

A sum of money paid regularly by a company to its shareholders

Major controlling documents in a company?

Memorandum of Association and Articles of Association