Ownership
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
Which source of business finance involves raising funds by issuing ownership shares?
Option 1: Debentures
Option 2: Retained earnings
Option 3: Equity shares
Option 4: GDRs
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
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 : Equity Shares and Preference Shares
Which feature makes equity shares different from preference shares?
Option 1: Fixed dividend payments
Option 2: Ownership rights in decision-making
Option 3: Redemption option
Option 4: No voting rights
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
Question : Case Study 75
ABC Corporation is a well-known company with its shares listed on a stock exchange. The company's management is reviewing the concept of dematerialization.
Question :
In dematerialization, what replaces physical share certificates?
Option 1: Trading orders
Option 2: Dividend checks
Option 3: Electronic records
Option 4: Ownership deeds
Correct Answer: Electronic records
Solution : The correct answer is (c) Electronic records
In dematerialization, physical share certificates are replaced by electronic records. Dematerialization involves converting physical share certificates, which are paper-based, into an electronic format. The ownership and details of the shares are recorded electronically, and these electronic records
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
What is the primary characteristic of equity shares?
Option 1: Fixed interest payments
Option 2: Ownership in the company
Option 3: Guaranteed redemption
Correct Answer: Ownership in the company
Solution : The correct answer is (b) Ownership in the company
Equity shares represent ownership or equity ownership in a company. Shareholders who hold equity shares have ownership rights in the company, which typically includes voting rights, the right to share in the company's
Question : Assertion-Reason Questions: Chapter - Sources of Business Finance
Assertion: Equity shareholders have ownership rights but limited voting power.
Reason: Equity shareholders are entitled to receive fixed dividends every year.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Both assertion and reason are false.
Correct Answer: Assertion is true, but the reason is false.
Solution : The correct answer is (c) Assertion is true, but the reason is false.
The assertion is true. Equity shareholders indeed have ownership rights in a company, which means they have a claim on the company's assets and earnings.
Question : Questions : Equity Shares and Preference Shares
Statement 1: Equity shareholders have ownership rights and voting power in company decisions.
Statement 2: Equity shareholders do not receive any dividends.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statements 1 and 2 are true.
Option 4: Both statements 1 and 2 are false.
Correct Answer: Statement 1 is true, and statement 2 is false.
Solution : The correct answer is (a) Statement 1 is true, and statement 2 is false.
Statement 1 is true. Equity shareholders have ownership rights in the company, and they possess voting power in company decisions. They can participate
Questions : Debentures and Financial Instruments
How are GDRs and ADRs similar in function?
Option 1: Both are used to issue equity shares
Option 2: Both are issued only in the domestic market
Option 3: Both represent ownership rights in the issuing company
Option 4: Both enable companies to raise funds in international markets
Correct Answer: Both enable companies to raise funds in international markets
Solution : The correct answer is (d) Both enable companies to raise funds in international markets
GDRs and ADRs are both financial instruments that enable companies to raise funds in international markets by issuing depositary receipts. GDRs are issued
What is the primary difference between debentures and equity shares?
Option 1: Debentures provide ownership rights
Option 2: Equity shares pay fixed interest
Option 3: Debentures are issued to employees only
Option 4: Equity shares require repayment at maturit
Correct Answer: Debentures provide ownership rights
Solution : The correct answer is (a) Debentures provide ownership rights
Debentures represent a form of debt where the holders (debenture holders) are creditors to the company and do not possess ownership rights in the company. They are entitled to receive a fixed rate
What distinguishes debentures from equity shares in terms of ownership and returns?
Option 2: Debentures pay fixed dividends
Option 3: Equity shares have fixed interest rates
Option 4: Equity shares are a form of long-term borrowing
Correct Answer: Debentures pay fixed dividends
Solution : The correct answer is (b) Debentures pay fixed interest
Debentures pay fixed interest to the debenture holders, as they are a form of debt and represent a loan from the debenture holder to the issuing company. In contrast, equity shares represent ownership
Question : Case Study: UVW Industries - Sustainable Financing for Green Initiatives
UVW Industries is a company committed to sustainable practices and is undertaking environmentally friendly initiatives. The company is exploring various sources of business finance to support its green projects.
How do debentures differ from equity shares in terms of ownership and returns?
Option 4: Equity shares represent short-term borrowing
This statement is correct. Debentures pay fixed interest to debenture holders, not dividends. The interest rate is predetermined and agreed upon at the time of issuing the debentures. Debentures are considered to be
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