Planning
Question : Case Study 20:
PQR Inc. is a conglomerate planning to acquire a pharmaceutical company to diversify its business.
Question :
To fund the acquisition of the pharmaceutical company, PQR Inc. is considering issuing bonds. What type of market activity is this?
Option 1: Primary market
Option 2: Secondary market
Option 3: Money market trading
Option 4: Equity share issuance
Correct Answer: Primary market
Solution : The correct answer is (a) Primary market
When PQR Inc. considers issuing bonds to fund the acquisition of the pharmaceutical company, this activity is associated with the primary market. The primary market is where new securities, such as bonds or stocks, are issued and sold directly by the issuing company or entity to investors. In this case, PQR Inc. would be issuing bonds for the first time to raise capital specifically for funding the acquisition, making it a primary market activity.
Question : The Constitution of India was framed by
Option 1: Planning Commission
Option 2: Constituent Assembly
Option 3: President
Option 4: Working Committee
Correct Answer: Constituent Assembly
Solution : The correct answer is Constituent Assembly.
The Indian Constitution, the longest of any sovereign nation in the world, provides a comprehensive framework to guide and govern the country, keeping in view her social, cultural, and religious diversity. Writing a constitution for an independent India was the reason the Constituent Assembly was established. It was a multi-member body. The members of the Constituent Assembly were selected from the provincial legislatures in 1945–1946 rather than being elected using the universal adult franchise.
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
How can PQR Enterprises raise funds through convertible preference shares?
Option 1: By issuing shares at a discount
Option 2: By converting shares into debentures
Option 3: By allowing conversion into equity shares
Option 4: By offering fixed interest payments
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.
Question : Questions : Business Finance and Its Meaning
Statement 1: Financial planning plays a pivotal role in effective resource allocation.
Statement 2: Financial planning primarily focuses on production activities.
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. Financial planning indeed plays a pivotal role in effective resource allocation within a business. It involves allocating financial resources optimally to various activities and functions to achieve the company's objectives efficiently.
Statement 2 is false. Financial planning is not limited to focusing on production activities. It encompasses a broader scope, including planning for all financial aspects of the business, such as investment, financing, budgeting, risk management, and overall financial strategy. Production activities are just one component of the overall financial planning process.
Question : Case Study: PQR Educational Institute
PQR Educational Institute is a well-reputed school offering various academic programs. They are planning to introduce new co-curricular activities to enhance students' overall development.
Question:
The type of plan that PQR Educational Institute should develop to implement the new co-curricular activities is:
Option 1: Tactical plan
Option 2: Strategic plan
Option 3: Contingency plan
Option 4: Operational plan
Correct Answer: Tactical plan
Solution : The correct answer is (a) Tactical plan
A tactical plan is specifically focused on the detailed actions and steps required to implement strategies outlined in a broader strategic plan. In this case, PQR Educational Institute would likely start with a strategic plan that outlines the long-term goals and vision for enhancing students' overall development through co-curricular activities. The tactical plan would then provide the specifics on how to execute those strategies, including the who, what, when, and where of implementing the new activities.
Question : Case Study 13:
XYZ Corporation is a conglomerate planning to diversify its operations by entering the renewable energy sector.
XYZ Corporation is issuing bonds with a fixed interest rate and maturity period of 10 years to fund its renewable energy projects. What type of bonds are these?
Option 1: Convertible bonds
Option 2: Floating-rate bonds
Option 3: Zero-coupon bonds
Option 4: Corporate bonds
Correct Answer: Corporate bonds
Solution : The correct answer is (d) Corporate bonds
Corporate bonds are debt securities issued by corporations, such as XYZ Corporation. They come with a fixed interest rate and a specified maturity period (in this case, 10 years). Investors who purchase corporate bonds receive regular interest payments (fixed interest rate) and, upon maturity, receive the face value of the bond. This option aligns with the scenario where XYZ Corporation is issuing bonds with a fixed interest rate and 10-year maturity period to fund its renewable energy projects.
PQR Inc. aims to acquire a pharmaceutical company for business diversification. Which market activity is associated with this scenario?
Option 2: Currency swap
Option 3: Mergers and acquisitions
Option 4: Treasury bill trading
Correct Answer: Mergers and acquisitions
Solution : The correct answer is (c) Mergers and acquisitions
Mergers and acquisitions involve the consolidation of companies or the purchase of one company by another, leading to the integration of operations and assets. In this case, PQR Inc. is planning to acquire a pharmaceutical company to diversify its business operations, which is a classic example of a merger or acquisition to expand and diversify their business portfolio.
Question : How did the suspension of the Five-year Plans impact India's approach to economic planning?
Option 1: It led to a shift towards a completely market-driven economy.
Option 2: It resulted in the adoption of ad-hoc annual plans.
Option 3: It initiated a move towards a socialist economy.
Option 4: It caused a permanent halt to economic planning.
Correct Answer: It resulted in the adoption of ad-hoc annual plans.
Solution : The suspension of the Five-year Plans in India resulted in the adoption of ad-hoc annual plans, as a temporary measure until the planning process could be resumed.
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