Question

On the basis of below given case study, answer the question.

The Directors of Shalini Ltd., which runs a famous fashion jewellery brand in India, have decided to expand their business activities globally especially targeting other Asian countries. Their Balance Sheet as at 31st March 2020 shows Equity Share Capital of ₹ 5 Crore, Preference Share Capital of ₹ 2 Crore and Borrowed Funds of ₹ 8 Crore. Their Balance Sheet is also reflecting Retained Earnings of ₹ 80 Lakh. The Directors are very much aware of the risks involved in International Business. Also, they are already under so much fixed obligation of payment of interest. But since they enjoy good reputation in the finance market hence various sources of finance are easily available to them. So, keeping all these factors in mind, they decided to increase their production for their international venture. For this, they need to increase the stock of raw material at an estimated cost of ₹ 1 crore.

As a finance manager of the Shalini Ltd., out of the following advise the directors the various sources open to the company to raise necessary finance for this purpose:

विकल्प

• Retained Earnings

• Public Deposits

• Trade Credit

• All of the above

Answer 1

All of the above

Explanation:

1. Retained Earnings: The company has ₹ 80 lakh in retained earnings as per the balance sheet. They can utilise this internal source for financing the need for raw materials.
2. Public Deposits: The company has a good reputation in the financial market. They can accept public deposits for financing working capital requirements like increasing raw material stock.
3. Trade Credit: The company can approach suppliers for trade credit (buy now, pay later) to obtain raw materials without immediate cash payments.