Tag: sources of business finance - 2

Questions Related to sources of business finance - 2

Investors who need steady income may not prefer equity shares as they get ___________ returns.

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. Fixed

  2. Fluctuating

  3. Higher

  4. Lower

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Correct Option: B
Explanation:

Investors who need steady or fixed dividend from the capital invested may not prefer equity shares as they fluctuating returns on the basis of the earnings of the company and receive all the leftovers after all the other claims are delt with.

Equity capital serves as ____________ capital as it is to be repaid only at the time of liquidation of a company.

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. Temporary

  2. Permanent

  3. Fluctuating

  4. Fixed

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Correct Option: B
Explanation:

Equity share capital is the prerequisite before the creation of a company. 

It is a source of finances raised for the formation of the company and it also represents the ownership of the company.
Equity capital serves as a permanent capital as it is to be repaid only at the time of liquidation.

Equity shares represent the __________ of a company.

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. Creditors

  2. Debtors

  3. Ownership

  4. Capital

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Correct Option: C
Explanation:

Equity shares is the most important source of raising long term capital by a company. 

Equity shares represent the ownership of the a company and thus is known as owner's capital or owner's funds. Equity share capital is the prerequisite before creation of a company.

If the rights of a particular class of share holders is to be changed then the company should call __________.

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. shareholders meeting

  2. directors

  3. class meetings

  4. preference shareholder meeting

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Correct Option: C
Explanation:

A company is an association of several persons. Decisions are made according to the view of the majority. Class meetings are meetings which are held by holders of a particular class of shares, e.g., preference shareholders. Such meetings are normally called when it is proposed to vary the rights of that particular class of shares.

For a guarantee company the liability of shareholder is ____________.

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. amount of guarantee specified in memorandum

  2. amount of guarantee given on paper

  3. both A & B

  4. unlimited

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Correct Option: A
Explanation:

A guarantee company is a type of corporation designed to protect members from liability. Guarantee companies often form when non-profit organizations wish to attain corporate status.  For a guarantee company the liability of shareholder is amount of guarantee specified in the memorandum.

Equity share holders may receive ____ on their investment.

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. interest

  2. dividend

  3. bonus

  4. (B) & (C)

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Correct Option: D
Explanation:

Equity share holders are the owners of the company, equity shares are also known as owner's share capital or owner's fund. Equity share holders may receive dividend and/or bonus. The profits that the company earns after the repayment of creditors and other liabilities is received by the equity share holders.

The Rights Shares are allotted only to the existing ________ of the company.

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. equity shareholders

  2. debenture shareholders

  3. deposit holders

  4. (B) & (C)

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Correct Option: A
Explanation:

The Rights Shares are allotted only to the existing equity shareholders. of the company. The shareholders who existed from earlier have the right to subscribe there shares.

Which of the following section of the Companies Act, 2013 prohibits to issue of shares at discount?

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. Section 53

  2. Section 54

  3. Section 55

  4. Section 56

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Correct Option: A
Explanation:

 Section 53 of the Companies Act, 2013 prohibits to issue of shares at discount. It means this section prevents the process of issuing shares at a less price than the actual price.

__________ have the right to vote on any resolution placed before the company or general meeting.

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. Preference shareholder

  2. Equity shareholders

  3. Debenture holder

  4. All of the above

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Correct Option: B
Explanation:
Equity shares is the most important source of raising long term capital by a company. Equity shares represent the ownership of a company and thus the capital raised by issue of such shares is known as ownership capital or owner’s funds. Hence, being the owners of the company, equity shareholders have the right to vote on any resolution placed before the company or general meeting.

Equity shareholder is _________.

commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

  1. entitled to dividend at a fixed rate

  2. not entitled to dividend at a fixed rate

  3. entitled to dividend of preference shareholder

  4. all of the above

Show answer
Correct Option: B
Explanation:
Equity shares represent the ownership of a company and thus the capital raised by issue of such shares is known as ownership capital or owner's funds. They are referred to as residual owners since they receive what is left after all other claims on the company income and assets have been settled. Therefore, equity shareholders are not entitled to dividend at a fixed rate.