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Questions
What are public deposits?
Briefly explain the following source of finance.
Public Deposits
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Solution
- Public deposits refer to the unsecured deposits invited by companies from the public, mainly to finance working capital needs.
- A company wishing to invite public deposits makes an advertisement in the newspapers. Any member of the public can fill up the prescribed form and deposit the money with the company.
- The company, in return, issues a deposit receipt. This receipt is an acknowledgement of debt by the company. The terms and conditions of the deposit are printed on the back of the receipt. The rate of interest on public deposits depends on the period of deposit and the reputation of the company.
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