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QUESTION 8: BUSINESS VENTURES (INVESTMENTS AND FORMS OF OWNERSHIP) Peter and Teko are partners in P & T Consultancy - NSC Business Studies - Question 8 - 2018 - Paper 1
Question 8
QUESTION 8: BUSINESS VENTURES (INVESTMENTS AND FORMS OF OWNERSHIP) Peter and Teko are partners in P & T Consultancy. They are considering investing their surplus fu... show full transcript
Worked Solution & Example Answer:QUESTION 8: BUSINESS VENTURES (INVESTMENTS AND FORMS OF OWNERSHIP) Peter and Teko are partners in P & T Consultancy - NSC Business Studies - Question 8 - 2018 - Paper 1
Step 1
Outline the functions of the JSE.
Answer
The Johannesburg Stock Exchange (JSE) serves several key functions:
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Facilitating Trade: The JSE provides a platform for buying and selling shares, allowing companies to raise capital and investors to trade securities.
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Market Regulation: It establishes rules to regulate trading activity, ensuring fair and transparent transactions.
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Financial Information Resource: The JSE acts as a barometer for the economic condition of South Africa, providing ongoing information regarding market performance.
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Investment Opportunities: The exchange makes various investment options available for individuals and institutions, enabling diversified portfolio management.
Step 2
Describe FOUR types of preference shares.
Answer
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Non-participating Preference Shares: These shares do not allow shareholders to participate in additional profits after equity shareholders have been compensated. Holders are entitled to a fixed dividend only.
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Cumulative Preference Shares: Shareholders are entitled to dividends that have accumulated even if they were not paid in the past due to insufficient profits; they are compensated for unpaid dividends when profits allow.
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Redeemable Preference Shares: These shares can be bought back by the issuing company at a specified time, allowing for flexibility in capital management.
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Convertible Preference Shares: Holders are allowed to convert their shares into a predetermined number of ordinary shares, granting potential upside linked to ordinary shares’ performance.
Step 3
Evaluate the impact of the RSA Retail Savings Bonds/government retail bonds on investors.
Answer
The RSA Retail Savings Bonds and government retail bonds offer several advantages and disadvantages:
Positives:
- Guaranteed Returns: Investors receive fixed interest rates, providing a predictable return, especially beneficial for risk-averse individuals.
- Accessibility: Investments can be made with relatively small amounts, making them accessible to a broad range of investors.
Negatives:
- Low Returns: Compared to stocks, the potential return is often lower, leading to a conservative growth strategy.
- Liquidity Issues: While cash may be withdrawn after a specified period, these bonds may not provide immediate liquidity.
Step 4
Advise Peter and Teko on how the following factors could contribute to the success and/or failure of their partnership: Management.
Answer
Management plays a crucial role in the success of a partnership:
- Decision-Making: Effective and timely decisions should be made. For example, if Peter and Teko disagree on critical issues, this may lead to operational inefficiencies.
- Conflict Resolution: An open channel for addressing conflicts is essential. Neglecting disagreements can result in resentment and affect collaboration.
The success of their partnership hinges on clear roles and shared objectives. Both partners must agree on management styles to harness their strengths effectively.
Step 5
Advise Peter and Teko on how the following factors could contribute to the success and/or failure of their partnership: Legislation.
Answer
Legislation is another significant aspect affecting partnerships:
- Compliance: They must comply with laws governing partnerships, ensuring registration and adherence to regulations to avoid penalties.
- Tax Obligations: Understanding tax implications under the Income Tax Act is crucial as it impacts profit distribution.
Failure to comply with relevant legislation may lead to liabilities, hindering their business operations.