Advertisements
Advertisements
Question
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.
Advertisements
Solution
- 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.
APPEARS IN
RELATED QUESTIONS
Big retail stores requires large amount of ............................. capital.
- Fixed
- Working
- Loan
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.
How does 'Inflation' affect the working capital requirements of a company? State.
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:
Level of collaboration
Answer the following question.
You are the finance manager of a newly established company. The Directors have asked you to determine the amount of fixed capital requirements for the company. Explain any five factors that you will consider while determining the fixed capital requirement for the company.
Discuss in brief any four factors that affect the working capital requirement of a company.
Which fund in an organisation possess finance for day to day operations
State any three factors that determine the requirement of fixed capital of a company.
The capital structure of XYZ Ltd. is highly geared. Explain any four factors that were considered by its Finance Manager while formulating such a capital structure for the company.
