Final answer:
The true statement concerning stock bonus plans and ESOPs is that they both give employees stock ownership and delay taxes on gains. The correct answer is (b) 1 only. Issuing stock allows a company to raise capital for growth without guaranteeing a rate of return, and the board of directors manages the company.
Step-by-step explanation:
Concerning stock bonus plans and Employee Stock Ownership Plans (ESOPs), statement 1 is true; they both give employees a stake in the company through stock ownership and allow taxes to be delayed on stock appreciation gains.
As for statement 2, it's not entirely accurate. While ESOPs are generally required to offer a repurchase option if their stock is not readily tradable on an established market, stock bonus plans may not necessarily create such an administrative and cash-flow problem, as they can differ in their structure and requirements. Therefore, answer option (b) 1 only, is the correct option.
When considering issuing stock or an initial public offering (IPO), companies do not promise a specific rate of return; instead, the value of the stock is determined by market forces.
Decision-making in a company owned by a large number of shareholders is typically undertaken by the board of directors, who are elected by the shareholders. Issuing stock is a way for companies to raise financial capital without the obligation to repay, as opposed to debt financing which requires regular interest payments. However, issuing stock involves significant expenses, legal and compliance requirements, and shareholders may expect dividends if the company is profitable.