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Question : Case Study 18:

LMN Corporation is a conglomerate planning to diversify its operations by entering the healthcare industry.

Question : 

To finance its entry into the healthcare industry, LMN Corporation is considering issuing bonds. What type of market activity is this?

Option 1: Secondary market
 

Option 2: Primary market
 

Option 3: Money market trading

 

Option 4: Equity share issuance

Team Careers360 24th Jan, 2024

Correct Answer: Primary market
 


Solution : The correct answer is (b) Primary market

Issuing bonds to finance its entry into the healthcare industry would involve engaging in the primary market. The primary market is where new securities, like bonds, are issued and sold for the first time by the issuing company or entity to investors. In this case, LMN Corporation is issuing bonds to raise capital for its expansion into the healthcare industry.

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Question : Monetray policy in India is formulated by:

 

Option 1: Finance Ministry

Option 2: RBI

Option 3: SEBI

Option 4: CLB

Team Careers360 17th Jan, 2024

Correct Answer: RBI


Solution : Correct Answer is RBI

The responsibility for creating the nation's monetary policy rests with the Reserve Bank of India. As a result, it is also referred to as the RBI's Monetary Policy. The RBI is granted this authority in accordance with the RBI Act of 1934. The money supply, credit availability, and interest rates are all governed by the RBI's monetary policy. 

7 Views

Question : Case Study: ABC Corporation - Financing Growth Strategies

ABC Corporation, a leading manufacturing company, is looking to finance its growth strategies. The company is exploring various sources of business finance to achieve its expansion goals.

Questions : Business Finance and Expansion

What is the primary objective of financial planning for ABC Corporation?

Option 1: Maximizing shareholder wealth
   

Option 2: Achieving short-term profitability only
 

Option 3: Meeting daily operational expenses

 

Option 4: Ensuring efficient use of company resources

Team Careers360 23rd Jan, 2024

Correct Answer: Maximizing shareholder wealth
   


Solution : The correct answer is (a) Maximizing shareholder wealth

Financial planning in a corporation involves strategies and actions aimed at optimizing the use of financial resources to achieve long-term goals and ultimately enhance shareholder wealth. It encompasses planning for investments, managing cash flows, optimizing capital structure, and making informed financial decisions to increase profitability, drive growth, and maximize the value of the business for its shareholders. While meeting daily operational expenses and ensuring efficient resource utilization are important aspects of financial planning, the overarching objective is to create value and wealth for the shareholders.

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Question : Case Study: PQR Enterprises - Funding Strategies for Diversification

PQR Enterprises is a well-established conglomerate planning to diversify its business operations. The company is evaluating various sources of business finance to support its diversification plans.

Questions : Equity Shares and Preference Shares

What is the main advantage of equity shares for PQR Enterprises?

Option 1: Fixed dividend payments
    

Option 2: No dilution of ownership
 

Option 3: Higher interest payments

 

Option 4: Guaranteed redemption

Team Careers360 15th Jan, 2024

Correct Answer: No dilution of ownership
 


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

Equity shares provide a way for PQR Enterprises to raise capital without incurring debt or having to make fixed payments, thus avoiding the obligation of repayment associated with loans or debentures. Additionally, issuing equity shares does not dilute the ownership stake of existing shareholders. Equity shareholders retain ownership rights and control over the company without a fixed commitment to pay dividends, providing more flexibility in managing the company's finances. 

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Question : Case Study 32

UVW Inc. is a technology startup aiming to raise funds for its innovative projects. The company's management is considering different methods of raising capital from the capital market.

Question : 

UVW Inc. is considering raising capital for its projects. Which market is primarily involved in raising capital for long-term investments?

Option 1: Primary market
 

Option 2: Secondary market
 

Option 3: Money market

 

Option 4: Capital market

Team Careers360 8th Jan, 2024

Correct Answer: Capital market


Solution : The correct answer is (d) Capital market

The capital market is primarily involved in raising capital for long-term investments. The capital market is where long-term financial instruments such as stocks, bonds, and other securities are bought and sold. It's a marketplace for businesses and governments to raise funds for long-term projects, investments, and expansion. The capital market includes both the primary market where new securities are issued and sold for the first time, and the secondary market where existing securities are traded among investors. On the other hand, the money market deals with short-term debt instruments and is more focused on liquidity and short-term financing.

Question : MUDRA is a financial institution set up by the Government of India for the development and refinancing of micro-unit enterprises. The full form of MUDRA is:

Option 1: Micro Urban Development & Refinance Agency

Option 2: Micro Units Development & Refinance Agency

Option 3: Micro Finance Usage Development & Refinance Agent

Option 4: Medium Units Development & Refinance Agency

Team Careers360 24th Jan, 2024

Correct Answer: Micro Units Development & Refinance Agency


Solution : The correct answer is Micro Units Development & Refinance Agency.

MUDRA stands for "Micro Unit Development and Refinance Agency." It is a financial institution established by the Government of India to support the development and refinancing of microenterprises, particularly those belonging to the non-corporate and non-farm sectors. MUDRA provides financial assistance and support to small businesses and entrepreneurs to help them grow and prosper.

2 Views

Question : Case Study: XYZ Ltd. - Raising Finance for Expansion

XYZ Ltd. is a growing company that manufactures electronic gadgets. The company has been successful in the market and is planning to expand its operations. To finance this expansion, XYZ Ltd. is considering various sources of business finance.

Questions : Different Sources of Business Finance

What is the benefit of using retained earnings as a source of business finance?

Option 1: No dilution of ownership
   

Option 2: Higher interest payments
   

Option 3: Guaranteed fixed dividends

 

Option 4: Immediate infusion of funds

Team Careers360 22nd Jan, 2024

Correct Answer: No dilution of ownership
   


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

Retained earnings refer to the portion of a company's profits that are retained and reinvested in the business rather than distributed to shareholders as dividends. By utilizing retained earnings, a company can avoid dilution of ownership because it does not have to issue additional shares to raise funds. This allows the existing shareholders to maintain their ownership stakes in the company without the need for external financing or bringing in new shareholders.

18 Views

Question : Arrange the following Development Financial Institutions (DFI) in the correct chronological order, according to the year they were set up.

(i) Industrial Credit and Investment Corporation of India (ICICI)

(ii) Industrial Development Bank of India (IDBI)

(iii) Industrial Finance Corporation of India (IFCI)

Option 1: (i)-(iii)-(ii)

Option 2: (iii)-(i)-(ii)

Option 3: (ii)-(i)-(iii)

Option 4: (i)-(ii)-(iii)

Team Careers360 17th Jan, 2024

Correct Answer: (iii)-(i)-(ii)


Solution : The correct answer is (iii)-(i)-(ii).

The correct chronological order of the Development Financial Institutions (DFIs) in India, according to the year they were set up, is as follows:

  1. Industrial Finance Corporation of India (IFCI): IFCI was established in 1948.
  2. Industrial Credit and Investment Corporation of India (ICICI): ICICI was founded in 1955.
  3. Industrial Development Bank of India (IDBI): IDBI was established in 1964.

So, the correct order is IFCI, ICICI, and then IDBI.

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Question : Case Study: PQR Enterprises - Funding Strategies for Diversification

PQR Enterprises is a well-established conglomerate planning to diversify its business operations. The company is evaluating various sources of business finance to support its diversification plans.

Questions : Different Sources of Finance

How can PQR Enterprises use retained earnings as a source of finance for its diversification?

Option 1: By selling company assets
   

Option 2: By raising funds through IPOs
   

Option 3: By utilizing accumulated profits

 

Option 4: By issuing preference shares

Team Careers360 8th Jan, 2024

Correct Answer: By utilizing accumulated profits

 


Solution : The correct answer is (c) By utilizing accumulated profits

Retained earnings are the portion of net profits that a company keeps and reinvests in the business rather than distributing them as dividends to shareholders. PQR Enterprises can utilize these accumulated profits or retained earnings to fund its diversification initiatives, such as entering new markets, developing new products, or expanding into different business areas. 

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