Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Shares

Question:

Why do shareholders elect a Board of Directors for a company?

Options:

To replace the shareholders as owners

To directly manage the company's affairs

To represent the shareholders and manage the company

To compete with other companies

Correct Answer:

To represent the shareholders and manage the company

Explanation:

The shareholders elect a Board of Directors to ensure that their interests are protected and to have a group of individuals who make important decisions on behalf of the company, while also overseeing its operations and management. The Board of Directors acts as a representative body for the shareholders, making decisions that align with the shareholders' interests and ensuring the effective management of the company.