Question

Explain the advantages of a joint stock company.

Answer 1

The advantages of a joint stock company are as follows:

1. Large Capital Resources: A public company may have an unlimited number of members and sell shares to them. A company’s credit is also high. Securities can be issued to raise capital from various investor categories. This allows companies to build huge amounts of money for large-scale enterprises.
2. Limited Liability: A company member is only liable for the face value of their shares. Personal property cannot be taken if the company fails to fulfil creditors demands. The risk is well-known and spread throughout a vast people. Limited liability promotes investment in companies.
3. Continuity of Existence: A joint stock company has a lengthy history of continuous operations. Because a corporation is a separate legal body, the death or insolvency of its members does not threaten its survival. Company ownership can change without disrupting operations.
4. Efficient Management: A company might hire qualified professionals in various areas of business management. Hiring professional managers improves company transaction efficiency. The combined judgement and experience of multiple directors allows for balanced and sensible decisions. Having many managers promotes specialisation and division of labour. Centralised administration ensures consistency in action and policy implementation.
5. Transferability of Shares: A public company’s shares are listed on the stock exchange, making it easy for shareholders to sell them. He is not obligated to keep them for life. Liquidity of investment promotes investment in industrial and commercial organisations.
6. Economies of Scale: The company business structure allows for significant development and expansion opportunities. Large-scale businesses benefit from adequate capital and expert management. A corporation can take advantage of economies of scale in production, marketing, finance, and other areas of business.
7. Democratic Management: A public company has a big membership and diverse ownership. The Board of Directors, elected by members, is responsible for management. Directors are accountable to the entire membership. The Companies Act of 2013 limits the authority of directors. This prevents oppression and mismanagement and promotes democratic administration.
8. Goodwill and public confidence: A company has a positive reputation and respect in the business sector. To gain public trust, it must share its results and follow all legal requirements. Auditors and the government monitor a company’s actions. It has popular confidence.