Advertisements
Advertisements
प्रश्न
'Mission Coach Ltd.' is a large and creditworthy company manufacturing coaches for Indian Railways. It now wants to export these coaches to other countries and decides to invest in
new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost, the company decides to tap the money market.
1) Name and explain the money-market instrument the company can use for the above
purpose
2) What is the duration for which the company can get funds through this instrument?
3) State any other purpose for which this instrument can be used.
Advertisements
उत्तर
a. Commercial paper can be used by Mission Coach Ltd. It is a promissory note which is negotiable and transferable. It is primarily used by large and credit-worthy companies for bridge financing. In other words, it is used as an alternative to borrowings from banks and the capital market. On commercial paper, companies pay an interest rate lower than market rates
b. Commercial papers have a maturity period ranging from a minimum of 15 days to a maximum of 1 year.
c. Commercial paper can be used to finance the seasonal and working capital requirements of enterprises
APPEARS IN
संबंधित प्रश्न
'Abhishek Ltd'. is manufacturing cotton clothes. It has been consistently earning good profits for many years. This year too, it has been able to generate enough profits. There is the availability of enough cash in the company and good prospects for growth in future. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices. It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of Rs 50 lakhs from I.C.I.C.I. Bank and is bound by certain restrictions on the payment of dividend according to the terms of the loan agreement.
The above discussion about the company leads to various factors which decide how much
of the profits should be retained and how much has to be distributed by the company.
Quoting the lines from the above discussion, identify and explain any four such factors.
Explain the following as factor affecting dividend decision:
Cash flow position
Give the meaning of ‘Investment’ and ‘Dividend’ decisions of financial management.
What is ‘Financial Risk?’ Why does it arise?
Financial management is based on three broad financial decisions. What are these?
Explain the factors affecting the dividend decision.
Identify the financial decision that is concerned with deciding how much of the profit earned by a company is to be distributed to shareholders and how much should be retained in the business. Also state any three factors affecting the identified decision.
What must a business determine about its total finance requirement when making a financing decision?
Besides the total amount of long-term finance required, what must a business identify?
What combination must a firm select when choosing between debt and equity?
What is the nature of debt in a debt-and-equity comparison?
Which payment is compulsory under the borrowing terms?
Which comparison of financial risk for debt and equity is correct?
How does debt normally affect ownership control?
What may be the effect of a fresh issue of equity on control?
What is financial risk?
What generally happens as the proportion of debt in total capital increases?
How does lower cost affect the attractiveness of a source of finance?
Which are examples of fixed operating costs?
