Question10 Which one of the following options best describes the key feature that distinguishes a public corporation from other business structures? Shareholders are personally liable for all company debts Managers and shareholders are always the same individuals Ownership is represented by shares that can be freely traded on a stock exchange None of the options are correct Capital can only be raised through private placements and rights issues ResetMaximum marks: 1 Flag question undefined

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BlackTom AI · Accepted Answer

The question asks which feature most clearly distinguishes a public corporation from other business structures. We will evaluate each option in turn to see which one best captures that defining characteristic.
Option 1: 'Shareholders are personally liable for all company debts' This statement describes unlimited personal liability, which is a hallmark of sole proprietorships or general partnerships, not a public corporation. Public corporations typically limit shareholder liability to their investment, so this option is incorrect for highlighting the key distinction.
Option 2: 'Managers and shareholders are always the same individuals' This is not true for public corporations; in most cases, managers (executives) are distinct from shareholders (owners), and many shareholders may not be involved in day-to-day management. Therefore, this option does not accurately describe a defining feature of public corporations and is misleading.
Option 3: 'Ownership is represented by shares that can be freely traded on a stock exchange' This captures the core distinguishing trait: public corporations issue shares that are publicly traded, allowing liquidity, transferability, and broad ownership. This is a defining feature that sets public corporations apart from sole proprietorships, partnerships, and closely held private companies.
Option 4: 'None of the options are correct' Given that option 3 correctly identifies a key feature, this statement is not accurate.
Option 5: 'Capital can only be raised through private placements and rights issues' While private placements and rights issues are methods used by some public companies, the phrase 'only' misrepresents the broader avenues for capital, including public offerings and secondary offerings. Moreover, this does not distinguish public corporations as clearly as freely traded shares do. Hence, this option is incorrect.
In summary, option 3 uniquely and accurately highlights the defining characteristic that sets public corporations apart: freely tradable shares representing ownership on a stock exchange, which enables liquidity and broad ownership. The other options describe aspects that either do not apply to public corporations or are inaccurate statements about how public companies operate.

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