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प्रश्न
Ratan Ltd. needs to raise funds from the financial market and, hence, considers issuing equity shares. State any four reasons to explain why this source of raising funds is considered by the company.
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उत्तर
- No fixed burden: Equity shares do not burden the company as dividends are based on profit availability and board of directors' intentions. The corporation is not required to pay dividends to equity shareholders, even if it is profitable.
- Permanent Capital: Equity share capital is considered long-term or permanent capital because a firm is not compelled to repay it during its lifetime. It is only reimbursed to shareholders when the company is wound up.
- Risk Capital: Equity capital is referred to as risk capital. In difficult times, a corporation can trade on equity to mitigate the risk associated with equity capital.
- No charge on assets: Equity shares do not generate a levy on the company's assets. A firm is free to use its assets to raise financing.
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संबंधित प्रश्न
Big retail stores requires large amount of ............................. capital.
- Fixed
- Working
- Loan
Identify the factor affecting fixed capital requirements of Fashion-ate Pvt. Ltd.
Radhika and Vani who are young fashion designers left their job with a famous fashion designer chain to set-up a company 'Fashionate Pvt. Ltd.' They decided to run a boutique during the day and coaching classes for entrance examination of National Institute of Fashion Designing in the evening. For the coaching centre they hired the first floor of a nearby building. Their major expense was money spent on photocopying of notes for their students. They thought of buying a photocopier knowing fully that their scale of operations was not sufficient to make full use of the photocopier. In the basement of the building of 'Fashionate Pvt. Ltd.' Praveen and Ramesh were carrying on a printing and stationery business in the name on 'Neo Prints Pvt. Ltd.' Radhika approached Praveen with the proposal to buy a photocopier jointly which could be used by both of them without making separate investment. Praveen agreed to this. Identify the factor affecting fixed capital requirements of 'Fashionate Pvt. Ltd.'
Rizul Bhattacharya after leaving his job wanted to start a Private Limited Company with his son. His son was keen that the company may start manufacturing of Mobile-phones with some unique features. Rizul Bhattacharya felt that the mobile phones are prone to quick obsolescence and a heavy fixed capital investment would be reuired regularly in this business. Therefore he convinced his son to start a furniture business.
Identify the factor affecting fixed capital requirements which made Rizul Bhattacharya to choose furniture business over mobile phones.
'Indian Logistics' has its own warehousing arrangements at key locations across the country. Its warehousing services help business firms to reduce their overheads, increase efficiency and cut down distribution time.
A state with reason, whether the working capital requirements of 'Indian Logistics' will be high or low.
Explain the following as factor affecting the requirements of fixed capital:
Natural of business
Explain the following as factor affecting the requirements of fixed capital:
Growth prospects
Explain the following as factor affecting the requirement of working capital:
Business cycle
What are the factors affecting requirement of fixed capital?
State any three factors that determine the requirement of fixed capital of a company.
Match the factors affecting fixed capital requirements given in Column - I with their explanations given in Column - II:
| Column - I | Column - II | ||
| (A) | Nature of Business | (i) | A trading organisation needs lower investments in fixed assets as compared to a manufacturing organisation. |
| (B) | Technology upgradation | (iii) | A textile manufacturing company is installing a cement manufacturing plant and thus its investments in fixed assets is increasing. |
| (C) | Diversification | (iii) | A capital-intensive organisation requires higher investments in fixed assets as compared to labour- intensive organisation. |
| (D) | Choice of Technique | (iv) | Mobile phones became obsolete faster and are replaced much sooner than furniture or many other assets. Hence, these type of businesses require more fixed capital. |
