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Explain the role of Shareholders in a company - Leaving Cert Business - Question A - 2007
Question A
Explain the role of Shareholders in a company. Shareholders are the owners of a company. They invest in a company by buying shares and they receive a dividend. Ordi... show full transcript
Worked Solution & Example Answer:Explain the role of Shareholders in a company - Leaving Cert Business - Question A - 2007
Step 1
Explain the role of Shareholders in a company.
Answer
Shareholders play a crucial role in a company, serving as its owners and the primary source of its capital through the purchase of shares. Their investment allows the company to operate and expand.
In return for their investment, shareholders receive dividends, which are a share of the company's profits typically paid out at regular intervals. This financial incentive encourages shareholders to support the company's growth and profitability.
Moreover, shareholders possess voting rights, giving them a voice in significant decisions such as the election of the Board of Directors during the Annual General Meeting (AGM). This democratic element ensures that shareholders can influence the direction and management of the company.
Finally, it's important to note that shareholders benefit from limited liability, meaning their potential losses are restricted to their investment in the company’s shares, protecting their personal assets in case the company faces financial difficulties.