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Question
Why is the principle of limited liability important for shareholders in a joint stock company?
Options
It allows shareholders to transfer shares freely.
It restricts the financial loss of shareholders to the unpaid value of shares.
It ensures shareholders participate in daily management.
It makes shareholders responsible for company debts.
MCQ
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Solution
It restricts the financial loss of shareholders to the unpaid value of shares.
Explanation:
The principle of limited liability is important because it limits a shareholder’s losses to the unpaid value of their shares. They are not personally liable for company debts, which promotes investment in joint stock companies.
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