Question 1
Listing on a stock exchange might be highly desirable for a company, but there are a number of requirements, conditions and costs associated with becoming a publicly listed corporation. a) Discuss the ASX profit test and asset test requirements. b) Analyse the advantages and costs that are incurred when a company becomes a publicly listed corporation.

a) To meet the profit test requirements of admission, an entity must satisfy each of the following conditions: * The entity must be a going concern, or the successor of a going concern. * The entity must have been engaged in the same principal business activity for the last three full financial years. * The entity must provide audited financial statements for the last three full financial years. The statements must be accompanied by audit reports, which must not be qualified with regard to the entity’s capacity to continue as a going concern, or satisfy the profit levels required. * The entity’s aggregated profit from continuing operations for the last three full financial years must have been at least $1 million. * The entity’s consolidated profit from continuing operations for the twelve months to a date no more than two months before the date the entity applied for admission must exceed $400 000. * The entity must give the ASX a statement from all directors (in the case of a trust, all directors of the responsible entity) confirming that they have made inquiries and nothing has come to their attention to suggest that the economic entity is not continuing to earn a profit from continuing operations up to the date of application.
The asset test requirement of admission is as follows: * At the time of admission an entity must have net tangible assets of at least $2 million after deducting the costs of fundraising, or a market capitalisation of at least $10 million.