Correct Answer: Governor, Reserve Bank of India

Solution : The correct answer is the Governor, Reserve Bank of India.

The monetary policy in India is carried out under the authority of the Reserve Bank of India. The policy often targets inflation or interest rates to ensure price stability. This committee is formed as a statutory commission entrusted with the task of fixing the benchmark policy rate.

Correct Answer: Both assertion and reason are false.

Solution : The correct answer is (d) Both assertion and reason are false.

The assertion is false. Business finance is crucial for decision-making and achieving company objectives. Financial decisions regarding investments, capital structure, cash flow management, and financial planning directly impact a company's ability to reach its goals and objectives effectively.

The reason is false. Financial decisions have a substantial impact on business operations and profitability. Proper financial decisions can optimize operations, allocate resources efficiently, and contribute to the overall profitability and success of a business. Financial decisions are integral to the functioning and success of a company.

Correct Answer: No dilution of ownership
  

Solution : The correct answer is (a) No dilution of ownership

Preference shares allow companies to raise funds without diluting ownership stakes or control. Unlike issuing additional common equity shares, issuing preference shares does not dilute the ownership of existing shareholders because preference shareholders do not have voting rights and do not participate in the day-to-day decision-making of the company. It allows the company to secure necessary capital while maintaining ownership concentration among existing shareholders. The fixed dividend payments associated with preference shares (option b) are also a characteristic but are not directly related to the advantage of no dilution of ownership.

Correct Answer: By allowing conversion into equity shares

Solution : The correct answer is (c) By allowing conversion into equity shares

Convertible preference shares grant the shareholder the right to convert these shares into equity shares at a predetermined conversion ratio and within a specified time frame. This allows the preference shareholders to become equity shareholders and participate in the ownership and growth of the company. It provides flexibility to the shareholders while potentially leading to an increase in equity capital for the company if the conversion option is exercised. This is a common way for companies to raise funds while attracting investors. Options a, b, and d are not accurate methods for raising funds through convertible preference shares.

Correct Answer: Ownership rights in decision-making
    

Solution : The correct answer is (b) Ownership rights in decision-making

Equity shares provide ownership rights to shareholders, giving them the ability to participate in the decision-making process of the company, such as voting on key issues and electing the board of directors. On the other hand, preference shares typically do not grant voting rights, and while they entitle shareholders to fixed dividend payments before equity shareholders, they don't carry the same level of decision-making influence.

Correct Answer: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
 

Solution : The correct answer is (a) Both assertion and reason are true, and the reason is the correct explanation of the assertion.

The assertion is true. The need for business finance does indeed arise due to uncertainties and risks that businesses face in their operations. Uncertainties in the market, economic fluctuations, competition, changes in consumer behavior, and various other unpredictable factors necessitate financial planning and resources to mitigate risks and sustain the business.

The reason is the correct explanation. Business operations are not always predictable and stable. The business environment is characterized by uncertainties, and operations can be affected by various factors, leading to fluctuations and risks. Due to this unpredictability, businesses need financial resources to navigate through challenges, ensure stability, and seize opportunities that arise. Finance helps in managing and mitigating the impact of uncertainties and risks on business operations.

Correct Answer: To enable foreign investors to invest in Indian companies

Solution : The correct answer is (d) To enable foreign investors to invest in Indian companies

IDRs are a financial instrument designed to facilitate foreign investment in Indian companies. They represent shares of a foreign company, typically issued by a foreign depository bank in India. IDRs provide an opportunity for foreign investors to invest in Indian companies and participate in the country's economic growth without directly owning the shares in the Indian company. This mechanism allows Indian companies to tap into international capital markets and broaden their investor base.

Correct Answer: To fund expansion projects and investments

Solution : The correct answer is (d) To fund expansion projects and investments

External financing is typically sought to fund expansion initiatives, invest in new projects, acquire assets, enter new markets, develop new products, hire additional staff, or cover increased operational expenses. It provides the necessary capital to support growth strategies and ensure the company's ability to capitalize on opportunities and achieve its long-term objectives. Lowering operational costs, decreasing market share, or enhancing employee satisfaction are not the primary reasons for seeking external financing for growth plans.

Correct Answer: Equity shares

Solution : The correct answer is (c) Equity shares

Equity shares represent ownership in a company and provide ownership rights and claims on the company's assets and earnings. When a company issues equity shares, it is essentially selling ownership stakes to investors, allowing them to become shareholders and participate in the company's growth and success. This is a common way for companies to raise funds for their operations, expansions, or other financial needs.

Correct Answer: Ownership rights in decision-making
    

Solution : The correct answer is (b) Ownership rights in decision-making

Equity shares provide ownership rights to shareholders, giving them the ability to participate in the decision-making process of the company, such as voting on key issues and electing the board of directors. On the other hand, preference shares typically do not grant voting rights, and while they entitle shareholders to fixed dividend payments before equity shareholders, they don't carry the same level of decision-making influence.