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Question : Assertion-Reason Questions: Chapter - Sources of Business Finance

Questions : Equity Shares and Preference Shares

Assertion: Equity shareholders have ownership rights but limited voting power.

Reason: Equity shareholders are entitled to receive fixed dividends every year.

Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
   

Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
    

Option 3: Assertion is true, but the reason is false.

  

Option 4: Both assertion and reason are false.

Team Careers360 11th Jan, 2024

Correct Answer: Assertion is true, but the reason is false.

  


Solution : The correct answer is (c) Assertion is true, but the reason is false.

The assertion is true. Equity shareholders indeed have ownership rights in a company, which means they have a claim on the company's assets and earnings. However, their voting power can be limited depending on the company's structure and the number of shares they hold.

The reason is false. Unlike preferred shareholders who are typically entitled to receive fixed dividends, equity shareholders (common shareholders) do not have a guaranteed or fixed dividend. Dividends for equity shareholders are decided by the company's board of directors and are subject to the company's profitability and dividend policy.

3 Views

Question : Case Study 82

XYZ Enterprises is a startup that aims to trade its shares on a stock exchange. The company's management is reviewing the concept of executing an order.

Question : 

What is the primary purpose of the settlement process in trading?

Option 1: Matching buy and sell orders
 

Option 2: Transferring ownership of shares
 

Option 3: Determining share prices

 

Option 4: Listing on stock exchange

Team Careers360 24th Jan, 2024

Correct Answer: Transferring ownership of shares
 


Solution : The correct answer is (b) Transferring ownership of shares

The primary purpose of the settlement process in trading is to facilitate the transfer of ownership of shares from the seller to the buyer. Once a trade order is executed, the settlement process ensures that the ownership rights and responsibilities related to the shares are transferred from the selling party to the buying party in a secure and regulated manner. This transfer of ownership is a crucial step in completing the trade and is essential for maintaining transparency and fairness in the securities market.

6 Views

Question : In pre-independence India, the class structure was largely influenced by:  
 

Option 1: Industrial development  
 

Option 2: Urbanization  
 

Option 3: Land ownership and agricultural production  

 

Option 4: Information technology  

Team Careers360 21st Jan, 2024

Correct Answer: Land ownership and agricultural production  

 


Solution : In pre-independence India, the class structure was largely influenced by land ownership and agricultural production, with a social hierarchy based on feudal and agrarian relationships.  

2 Views

Question : Case Study: XYZ Ltd. - Raising Finance for Expansion

XYZ Ltd. is a growing company that manufactures electronic gadgets. The company has been successful in the market and is planning to expand its operations. To finance this expansion, XYZ Ltd. is considering various sources of business finance.

Questions : Equity Shares and Preference Shares

What is the main characteristic of equity shares?

 

Option 1: Fixed dividend payments
 

Option 2: No voting rights
 

Option 3: Ownership in the company

 

Option 4: Guaranteed redemption

Team Careers360 16th Jan, 2024

Correct Answer: Ownership in the company

 


Solution : The correct answer is (c) Ownership in the company

Equity shares represent ownership or equity ownership in a company. Shareholders who hold equity shares have ownership rights in the company, which typically includes voting rights, the right to share in the company's profits (through dividends), and the right to participate in decision-making processes related to the company's operations and policies. Unlike debt securities (e.g., debentures), equity shares do not guarantee fixed dividend payments or redemption; instead, the dividend payments to equity shareholders are variable and based on the company's profitability and the decisions of the board of directors.

18 Views

Question : Which of the following statement is correct?
Statement 1: Marketing focus is on achieving maximum satisfaction of the customers needs.
Statement 2: The main focus of the selling is to transfer of ownership of the product from the seller to the buyer.

Option 1: Both are true 

Option 2: Both are false

Option 3: Statement 1 is true and statement 2 is false.

Option 4: Statement 1 is false and statement 2 is true.

 

Team Careers360 20th Jan, 2024

Correct Answer: Both are true 


Solution : Marketing scope is broad. Marketing main focuses on achieving maximum satisfaction of the customers needs. Selling focus is on the transfer of ownership of the product from the seller to the buyer. In the marketing with the view to earning profit,priority is given to consumer satisfaction.

Hence, option A is correct.

11 Views

Question : Case Study 32

RST Enterprises is a conglomerate that wants to trade its shares on a stock exchange. The company's management is in the process of selecting a brokerage firm.

Question : 

What role does the selected brokerage firm play in the trading process for RST Enterprises?

Option 1: Matching buy and sell orders
 

Option 2: Transferring ownership of shares
 

Option 3: Facilitating transactions

 

Option 4: Listing on stock exchange

Team Careers360 23rd Jan, 2024

Correct Answer: Facilitating transactions

 


Solution : The correct answer is (c) Facilitating transactions

The selected brokerage firm plays the role of facilitating transactions in the trading process for RST Enterprises. Brokerage firms act as intermediaries that facilitate the buying and selling of securities on behalf of their clients. They enable transactions by connecting buyers and sellers, executing trades, providing market research and advice, managing accounts, and ensuring compliance with regulations. The brokerage firm is crucial in facilitating smooth and efficient transactions on the stock exchange for RST Enterprises. Matching buy and sell orders is more related to the stock exchange itself. Transferring ownership of shares is part of the settlement process after a trade is executed. Listing on the stock exchange is a separate process where a company's shares are listed and made available for trading on the exchange.

6 Views

Question : Case Study: PQR Enterprises - Funding Strategies for Diversification

PQR Enterprises is a well-established conglomerate planning to diversify its business operations. The company is evaluating various sources of business finance to support its diversification plans.

Questions : Debentures and Financial Instruments

What makes debentures distinct from equity shares?

Option 1: Debentures provide ownership rights
    

Option 2: Debentures pay fixed dividends
 

Option 3: Debentures are short-term securities

 

Option 4: Equity shares are issued by governments

Team Careers360 16th Jan, 2024

Correct Answer: Debentures pay fixed dividends
 


Solution : The correct answer is (b) Debentures pay fixed dividends

To elaborate further, debentures are debt instruments where the issuing company agrees to pay a fixed rate of interest to the debenture holders at regular intervals until the maturity date. On the other hand, equity shares represent ownership in a company and do not involve fixed dividend payments. Instead, equity shareholders participate in the company's profits through dividends, which are not fixed and can vary based on the company's performance and decisions.

9 Views

Question : Case Study: LMN Ventures - Financing Innovation and Research

LMN Ventures is a research-driven technology company aiming to innovate and develop cutting-edge products. The company is exploring various sources of business finance to support its research and development endeavors.

Question:Different Sources of Finance

What is the primary characteristic of equity shares?

Option 1: Fixed dividend payments
  

Option 2: Ownership in the company
 

Option 3: Guaranteed redemption

 

Option 4: No voting rights

Team Careers360 8th Jan, 2024

Correct Answer: Ownership in the company
 


Solution : The correct answer is (b) Ownership in the company

Equity shares represent ownership in a company and entitle shareholders to a portion of the company's profits, distributed in the form of dividends. Unlike debt instruments, such as bonds, equity shares do not come with fixed dividend payments, guaranteed redemption, or specific fixed interest rates. Additionally, equity shareholders typically have voting rights, allowing them to participate in important decisions and the governance of the company.

11 Views

Question : Peasants' movements in India have historically fought for:

 

Option 1: The abolition of monarchy

Option 2: The implementation of digital technology in agriculture

Option 3: The rights to land ownership and fair agricultural practices

Option 4: The promotion of urbanization

Team Careers360 10th Jan, 2024

Correct Answer: The rights to land ownership and fair agricultural practices


Solution : Peasants' movements in India have historically fought for the rights to land ownership and fair agricultural practices, addressing issues such as tenancy, land redistribution, and agricultural pricing.

9 Views

Question : Case Study 30

LMN Corporation is a conglomerate that has executed trades on a stock exchange. The company's management is preparing for the settlement process.

Question : 

What does the settlement process involve after LMN Corporation executes trades on the stock exchange?

Option 1: Selecting a broker
 

Option 2: Matching buy and sell orders
 

Option 3: Transferring ownership and funds

 

Option 4: Opening a demat account

Team Careers360 15th Jan, 2024

Correct Answer: Transferring ownership and funds

 


Solution : The correct answer is (c) Transferring ownership and funds

The settlement process, after LMN Corporation executes trades on the stock exchange, involves transferring ownership and funds. In this phase, the actual transfer of securities (ownership) and funds (money) occurs between the buyer and the seller. The securities are moved from the seller's demat account to the buyer's demat account, and the funds are transferred from the buyer to the seller.

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