Correct the Underlined Word and Rewrite the Following Sentence (Weightage 5 Marks)
1. Introduction to Corporate Finance
1. Finance is needed to pay dividend to debentureholders.
Ans: Finance is needed to pay interest to debenture holders.
2. When there is recession in economy sales will increase.
Ans: When there is boom in economy sales will increase.
3. Share is an acknowledgement of loan raised by company.
Ans: Debenture is an acknowledgment of loan raised by company.
4. Equity shares carry dividend at fixed rate.
Ans: Preference shares carry dividend at fixed rate.
2. Sources of Corporate Finance
1. Owned capital is temporary capital.
Ans: Owned capital is permanent capital.
2. Equity shares get dividend at fixed rate.
Ans: Equity shares get dividend at fluctuating rate.
3. Preference shares get dividend at fluctuating rate.
Ans: Preference shares get dividend at fixed rate.
4. Retained earnings is an external sources of finance.
Ans: Retained earnings is an internal source of finance.
5. Debentureholder is owner of the company.
Ans: Debenture Holder is creditor of the company.
6. Bond is a source of short term finance.
Ans: Bond is a source of long term finance.
7. Depository Receipt traded in USA is called as Global Depository Receipt.
Ans: Depository Receipt traded in USA is called as American Depository Receipt.
3. Issue of Shares
1. Issued capital is the maximum capital which a company can raise by issuing shares.
Ans: Authorised capital is the maximum capital which a company can raise by issuing shares.
2. Under Fixed price issue method, the price of shares is fixed through bidding process.
Ans: Under book building method the price of shares is fixed through bidding process.
3. FPO refers to offering of shares to the public for the first time.
Ans: IPO refers to offering of shares to the public for the first time.
4. Only fully paid up shares can be forfeited.
Ans: Only partly paid shares can be forfeited.
5. Bonus shares are offered to existing employees of a company.
Ans: Bonus shares are offered to existing equity shareholders of a company.
6. Company enters into an underwriting agreement with the shareholders.
Ans: Company enters into an underwriting agreement with the underwriters.
7. Letter of Allotment is sent to applicants when no shares are allotted to them.
Ans: Letter of Regret is sent to applicants when no shares are allotted to them.
8. Duplicate share certificate must be issued within one month from date of application.
Ans: Duplicate share certificate must be issued within three months from date of application.
9. Call money cannot exceed 5% of nominal value of shares.
Ans: Call money cannot exceed 25% of nominal value of shares.
4. Issue of Debentures
1. The details of debenture holders are entered in Register of Members.
Ans : The details of debenture holders are entered in Register of Debenture holder.
2. Secured debentures must be redeemed within 15 years from the date of its issue.
Ans : Secured debentures must be redeemed within 30 days from the date of its issue
3. A company issuing irredeemable debentures must create a charge on assets of the company.
Ans : A company issuing Secured debentures must create a charge on assets of the company.
4. Return on investment on debentures is dividend.
Ans : Return on Investment on debenture is interest.
5. Debenture Trustees redress the grievances of shareholders.
Ans : Debenture trustees redress the grievances of Debenture holders.
6. Debenture certificates are issued within 3 months of allotment of debentures.
Ans : Debenture certificates are issued within 6 months of allotment of debentures.
7. Procedure for allotment of debentures should be completed within 90 days from date of receipt of applications.
Ans : Procedure for allotment of debentures should be completed within 60 days from date of receipt of application.
8. To rate its debentures a company appoints underwriters.
Ans : To rate its debentures a company appoints Credit Rating Agency.
5. Deposits
1. Government Company can accept deposit from members.
Ans: Government Company can accept deposit from Public.
2. Company issues advertisement to invite its members for subscribing to its deposits.
Ans: Company issues Circular to invite its members for subscribing to its deposits.
3. Company appoints Credit Rating Agency to protect the interest of Depositors.
Ans: Company appoints Deposit Trustees to protect the interest of Depositors.
4. Deposit Receipt is issued within seven days from date of receipt of deposits.
Ans: Deposit Receipt is issued within Twenty One days from date of receipt of deposits.
5. Register of deposits is to be filed with the Registrar of companies on or before 30th June every year.
Ans: Return of deposits is to be filed with the Registrar of companies on or before 30th June every year.
6. Charge on assets is created when company issues unsecured deposit.
Ans: Charge on assets is created when company issues secured deposit.
7. Minimum tenure of deposit is 36 months.
Ans: Minimum tenure of deposit is 6 months.
6. Correspondence with Members
1. Dividend is recommended by shareholders.
Ans: Dividend is recommended by Board of Directors.
2. The person who purchases shares of the company is called Depositor.
Ans: The person who purchases shares of the company is called Shareholder.
3. Bonus shares are issued as a free gift to the preference shareholders.
Ans: Bonus shares are issued as a free gift to the Equity shareholders .
4. Payment of dividend must be made within 21 days of its declaration.
Ans: Payment of dividend must be made within 30 days of its declaration.
5. A company must issue the Share Certificate within three months of allotment of shares.
Ans: A company must issue the Share Certificate within Two months of allotment of shares.
7. Correspondence with Debentureholders
1. The person who purchases debentures of the company is called shareholder.
Ans: The person who purchases debentures of the company is called Debenture holder.
2. Debenture holders get regular dividend at fixed rate.
Ans: Debenture holders get regular Interest at fixed rate.
3. A Share Certificate must be issued after allotment of debentures.
Ans: A Debenture Certificate must be issued after allotment of debentures
4. A Debenture Redemption Reserve Fund is created by the company for the redemption of Shares.
Ans: A Debenture Redemption Reserve Fund is created by the company for the redemption of Debentures.
5. A Demat Request Form is sent along with the letter of Redemption of Debentures.
Ans: A Debenture Redemption Form is sent along with the letter of Redemption of Debentures.
6. A company must issue Debenture Certificate within 8 months of allotment of debentures.
Ans: A company must issue Debenture Certificate within 6 months of allotment of debentures.
8. Correspondence with Depositors
1. Depositors are owners of the company.
Ans: Depositors are Creditors of the company.
2. Deposits are the internal source of financing.
Ans: Deposits are the External source of financing.
3. Deposit is a long term source of capital.
Ans: Deposit is a short term source of capital.
4. Depositors are entitled to receive dividend.
Ans: Depositors are entitled to receive Interest.
9. Depository System
1. Electronic mode of holding securities is risky.
Ans: Physical mode of holding securities is risky.
2. Allotment and Transfer of securities is time consuming in electronic mode.
Ans: Allotment and Transfer of securities is time consuming in Physical mode .
3. Banking system leads to a scrip less capital market.
Ans: Depository system leads to a scrip less capital market.
4. Storage of Certificates is not required in Physical mode of holding
Ans: Storage of Certificates is not required in Electronic/Depository mode of holding
5. India has a single Depository system.
Ans: India has a Multi Depository system.
6. Depository Participant in India has to register under the partnership act.
Ans: Depository Participant in India has to register under the SEBI Act
7. Demat accounts are opened and maintained by the Depository.
Ans: Demat accounts are opened and maintained by the DP
8. Securities are fungible in Physical mode.
Ans: Securities are fungible in Electronic mode.
9. ISIN is a code given to a company.
Ans: ISIN is a code given to a Securities
10. ISIN of Indian Government securities is issued by NSDL.
Ans: ISIN of Indian Government securities is issued by RBI.
10. Dividend and Interest
1. Dividend is paid to creditors.
Ans: Dividend is paid to Registered Shareholder
2.Interest is paid to shareholders.
Ans: Interest is paid to Creditors.
3. Final Dividend is paid between two AGMs.
Ans: Interim Dividend is paid between two AGMs.
4. Special Resolution must be passed to declare Final Dividend.
Ans: Ordinary Resolution must be passed to declare Final Dividend.
5. Dividend must be paid within 60 days of its declaration.
Ans: Dividend must be paid within 30 days of its declaration.
6. The Dividend to be paid should be transferred to Dividend A/c within 30 days of its declaration.
Ans: The Dividend to be paid should be transferred to Dividend A/c within 5 days of its declaration.
7. Dividend is an obligation to be paid by a company every year.
Ans: Interest is an obligation to be paid by a company every year.
8. Preference shareholders are given the last priority in payment of dividend.
Ans: Equity shareholders are given the last priority in payment of dividend.
9. Preference shareholders get dividend from residual profits.
Ans: Equity shareholders get dividend from residual profits.
10. Dividend is payable every year irrespective of profits made by company.
Ans: Interest is payable every year irrespective of profits made by company.
11. Financial Market
1. In Primary market, already existing securities are traded.
Ans: In Secondary market, already existing securities are traded.
2. Companies sell fresh shares for the first time to the public in secondary market.
Ans: Companies sell fresh shares for the first time to the public in Primary Market
3. In Money market, the instruments traded have maturity period of more than one year.
Ans: In Capital market, the instruments traded have maturity period of more than one year.
4. Financial market can be classified as capital market and call money market.
Ans: Financial market can be classified as capital market and money market.
12. Stock Exchange
1. One of the functions of SEBI is to protect the interest of issuers of securities in the securities market.
Ans: One of the functions of SEBI is to protect the interest of Investor in the securities market.
2. A Broker cannot directly deal with investors.
Ans: A Jobber cannot directly deal with investors.
3. A Bear expects the prices of shares to rise in future.
Ans: A Bull expects the prices of shares to rise in future.
4. A Bull buys new issues of securities from primary market.
Ans: A Stag buys new issues of securities from primary market.
5. A stock market is an important constituents of money market.
Ans: A stock market is an important constituents of Capital Market.