Planning
Question : Case Study 3:
MNO Inc. is a well-known conglomerate that is planning to diversify its business operations by acquiring other companies.
Question :
To finance its acquisition plans, MNO Inc. is considering issuing bonds. What type of market activity does this represent?
Option 1: Primary market
Option 2: Secondary market
Option 3: Money market
Option 4: Capital market
Correct Answer: Primary market
Solution : The correct answer is (a) Primary market
If MNO Inc. is considering issuing bonds to finance its acquisition plans, it represents a primary market activity. The primary market is where new securities, such as bonds and stocks, are issued for the first time and sold directly by the issuing company to investors. In this case, MNO Inc. would issue bonds to raise funds for its acquisition plans. Investors would purchase these newly issued bonds directly from MNO Inc., and the company would receive the proceeds from the sale of these bonds. This infusion of capital from the sale of bonds would then be used to finance the acquisition of other companies, helping MNO Inc. diversify its business operations.
The secondary market, on the other hand, is where existing securities are bought and sold among investors, and the issuing company does not directly receive proceeds from these transactions. The money market primarily deals with short-term debt securities, and the capital market encompasses both the primary and secondary markets for long-term securities.
Question : Assertion-Reason Questions: Chapter - Sources of Business Finance
Questions : Business Finance and Its Meaning
Assertion: Financial planning plays a critical role in optimizing the allocation of funds and resources.
Reason: Financial planning focuses solely on allocating funds to marketing activities.
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.
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. Financial planning involves efficiently allocating funds and resources to various activities within a business, aiming to achieve the company's financial goals and objectives.
The reason is false. Financial planning is a comprehensive process that involves the allocation of funds to various areas within a business based on the organization's goals and priorities. While marketing may be one area where funds are allocated, financial planning covers all aspects of resource allocation, not just marketing.
Question : Case Study 80
LMN Corporation is a well-established company planning to raise funds for its expansion projects. The company's management is considering the regulatory functions of SEBI.
What is the primary regulatory role of SEBI?
Option 1: Allocating resources to companies
Option 2: Facilitating trading on stock exchanges
Option 3: Protecting the rights of investors
Option 4: Providing loans to companies
Correct Answer: Protecting the rights of investors
Solution : The correct answer is (c) Protecting the rights of investors
The primary regulatory role of the Securities and Exchange Board of India (SEBI) is to protect the rights of investors. SEBI is the regulatory body for the securities market in India. It oversees and regulates the securities market to ensure fair and transparent dealings, protect the interests of investors, and promote a conducive environment for investment. SEBI's responsibilities include ensuring that companies provide accurate and adequate information to the investors, preventing fraudulent and unfair trade practices, and maintaining market integrity and transparency. Through its regulations and guidelines, SEBI plays a crucial role in safeguarding the rights and interests of investors in the securities market.
Question : Which of the following statement is correct? Statement 1- Manpower planning belongs to staffing function of management. Statement 2- Division of activities and creation of organisational structure belongs to organising function of management.
Option 1: Both are true
Option 2: Both are false
Option 3: Statement 1 is true and statement 2 is false.
Option 4: Statement 2 is true and statement 1 is false.
Correct Answer: Both are true
Solution : Manpower planning belongs to staffing function of management. Division of activities and creation of organisational structure belongs to organising function of management. Hence option A is correct .
Question : Case Study 16:
GHI Ltd. is a leading company in the telecommunications sector planning to expand its international operations.
GHI Ltd. is looking to raise funds for expanding its international operations. Which type of financial instrument might it use?
Option 1: Commercial paper
Option 2: Equity share
Option 3: Debenture
Option 4: Treasury bill
Correct Answer: Equity share
Solution : The correct answer is (b) Equity share.
Equity shares are a type of security that represents ownership in a company. When a company sells equity shares, it is raising funds by selling a piece of itself to investors. Equity shares are a good way for companies to raise funds for long-term investments, such as expanding international operations.
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 : Different Sources of Finance
How can PQR Enterprises use retained earnings as a source of finance for its diversification?
Option 1: By selling company assets
Option 2: By raising funds through IPOs
Option 3: By utilizing accumulated profits
Option 4: By issuing preference shares
Correct Answer: By utilizing accumulated profits
Solution : The correct answer is (c) By utilizing accumulated profits
Retained earnings are the portion of net profits that a company keeps and reinvests in the business rather than distributing them as dividends to shareholders. PQR Enterprises can utilize these accumulated profits or retained earnings to fund its diversification initiatives, such as entering new markets, developing new products, or expanding into different business areas.
Question : Which of the following is not an objective of the National Rehabilitation and Resettlement Policy (2007) of the government of India?
Option 1: To maximise the focus on rehabilitation without really caring about resettlement
Option 2: To integrate rehabilitation concerns into the development planning and implementation process
Option 3: To minimise displacement and to promote, as far as possible, not-displacing or taut-displacing alternatives
Option 4: To provide a better standard of living, making concerted efforts to provide sustainable income to the affected families
Correct Answer: To maximise the focus on rehabilitation without really caring about resettlement
Solution : The correct answer is to maximise the focus on rehabilitation without really caring about resettlement.
The National Rehabilitation and Resettlement Policy, 2007 provides for compensation to people whose land is acquired or any other involuntary displacement. The scheme has been formulated by the Ministry of Rural Development and the Department of Land Resources.
Question : The Planning Commission of India was established in the year
Option 1: 1947
Option 2: 1949
Option 3: 1950
Option 4: 1952
Correct Answer: 1950
Solution : The Correct Answer is- 1950
The Planning Commission was a department of the Indian government responsible for creating five-year plans as well as performing a variety of other duties. The first chairman of the Planning Commission was Jawaharlal Nehru. It was founded in 1950 to supervise the nation's social and economic growth, primarily through the creation of five-year plans.
Question : The organization responsible for estimating poverty in India is:
Option 1: Reserve Bank of India
Option 2: Ministry of Finance
Option 3: Planning Commission (now NITI Aayog)
Option 4: Central Statistical Office
Correct Answer: Planning Commission (now NITI Aayog)
Solution : The correct answer is (c) Planning Commission (now NITI Aayog)
The Planning Commission was responsible for formulating India's five-year plans and monitoring their implementation. It also used to estimate poverty in India, using data from the National Sample Survey Office (NSSO). The NSSO conducts surveys on household consumption expenditure, which is used to calculate the poverty line.
In 2014, the Planning Commission was replaced by NITI Aayog. NITI Aayog is still responsible for estimating poverty in India. The latest poverty estimates were released by NITI Aayog in 2019. The estimates showed that the poverty ratio in India had declined from 21.9 % in 2011-12 to 17.9 % in 2017-18.
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