To determine the nominal value of each share in the limited liability company described in the question, we need to analyze the information provided step-by-step.
Step-by-Step Explanation
- Understanding Authorized Share Capital:
- The company has an authorized share capital of N50 million. This is the maximum amount of share capital that the company is allowed to issue to shareholders.
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This authorized capital is split into 100 million shares.
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Calculating the Nominal Value of Each Share:
- The nominal value (also known as par value) of a share is calculated by dividing the total authorized share capital by the total number of shares.
- Formula:
[
\text{Nominal Value per Share} = \frac{\text{Total Authorized Share Capital}}{\text{Total Number of Shares}}
]
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Plugging in the values:
[
\text{Nominal Value per Share} = \frac{N50,000,000}{100,000,000} = N0.50
]
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Conclusion:
- Therefore, the nominal value of each share is N0.50. This means that each share has a face value of N0.50, which is the value assigned to it in the company's balance sheet.
Explanation of Other Options
- Option A: N2:
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This option is incorrect because it suggests that each share has a nominal value of N2. Given the total authorized capital and the number of shares, this value is not supported by the calculations.
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Option B: N0.80:
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This option is also incorrect. A nominal value of N0.80 would imply a higher total authorized capital than N50 million when calculated against 100 million shares, which contradicts the information provided.
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Option C: N0.60:
- This option is incorrect as well. A nominal value of N0.60 would again suggest a different total authorized capital than what is stated in the question.
Common Pitfalls
- Confusing Nominal Value with Market Value: It's important to remember that the nominal value is not the same as the market value of a share, which can fluctuate based on supply and demand.
- Misunderstanding Authorized vs. Issued Capital: The question discusses authorized capital, which is the maximum amount the company can issue, not necessarily what has been issued or subscribed.
Revision Summary
- The nominal value of a share is calculated by dividing the total authorized share capital by the total number of shares.
- In this case, the nominal value is N0.50, derived from N50 million authorized capital divided by 100 million shares.
- Understanding the difference between nominal value and market value is crucial in financial accounting.
- Always ensure clarity on terms like authorized capital, issued capital, and subscribed capital to avoid confusion in calculations.