Business Finance: Company Features, Importance of Cash, Corporate Governance, Gearing

Business Finance

Contents
MAIN BODY..................................................................................................................................3
A. Define company and its features. Also explain advantages and disadvantages of a company.
.....................................................................................................................................................3
B. Explain the importance of Cash for a business. Is profit being the indicator that a business
has cash balances. And also explain the difference between the two..........................................4
C. Explain the reason behind the existence of Corporate Governance. Also explain principles
of corporate governance..............................................................................................................5
D. Explain Gearing and also explain its advantages and disadvantages of gearing. Also state
the reason behind the banks interest in the gearing level of a company......................................6
REFERENCES................................................................................................................................8

MAIN BODY
A. Define company and its features. Also explain advantages and disadvantages of a company.
A company is termed as body corporate which is an incorporated business which is registered
under the Companies Act. A company can be of any type such as public or private company,
unlimited or limited company, company with share capital, company limited by guarantee, or
community interest company (Borgogno and Colangelo, 2020).
Features of a company are as below:
 Artificial Person: A company is artificial person which is registered under company’s act.
Law grants permission to the company to enter into a contract related to acquire property
or dispose any existing property with the name of the organisation.
 Separate Legal Entity: Company is treated as different from the owner of the organisation
as the person is not individually liable for the operations of the business. Individual
members cannot be sued on the actions performed by the organisation.
 Common Seal: A company is an artificial person thus in order to enter into a contract
organisation have to sign document, that is done by applying the seal on the document.
Any document carrying common seal of the company makes company for such action.
 Limited liability: A company can be limited by shares and limited by guarantee. The
liability of the company is limited to the extent of the amount invested by the investor in
the company. The organisation cannot demand more amount then the amount agreed by
the individual at the time of contract.
Perpetual Existence: Unlike other entities, company is much more stable as it is governed by
law. Life of organisation does not depend on members, employees or shareholders of the
organisation (Kowalski, Lee and Chan, 2021).
Advantages and Disadvantages of Public Limited Company:
Advantages:
 Availability of funds: One of the advantages of a public company is that it can raise
money by selling their shares in the market. Share of a company is equal to the ownership
of that company. A private company manages funds from banks, FII or individual
investors which is need by the organisation in order to provide finances for the business
operations. Public company raises funds from primary or secondary market with the help