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25 April, 21:06

List any 2 merits and demerits of a company

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  1. 25 April, 23:37
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    Merits

    • limited liability

    • Perpetual existence

    Demerits

    •Company mismanagement

    •Lack of secrecy

    Explanation:

    Merits

    ° limited liability. The liabilities of the shareholders are limited to the value of investment they have in the company. This means that should the company becomes insolvent, the shareholders will only loose their investment in the firm and not their personal properties.

    °Perpetual existence. This is based on the principle of separate legal entity, which means that the death of any shareholder or director would not in any way affect the existence of the company.

    Demerits

    ° Company Mismanagement. One of the demerits of company is Mismanagement. The directors sometimes mismanage company's fund for their personal and selfish benefits which oftentimes throw the company into debt.

    ° Lack of secrecy. There is no secrecy in company as annual reports are given to the shareholders hence enable the competitors know it's performance and also provide company statements to registrar of companies.
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