Solution:

1. Machinery is a fixed asset. This is because it stays with a company for a long period.
2. Capital used for the purchase of machinery is fixed capital.
3. Yes, the size of a business determines the fixed capital requirement. Large size business has high fixed capital requirements and small size of the business has a low fixed capital requirement.

Solution:

1. As per the Balance Sheet of a Donald Company, the company is financially sound because it has sufficient equity share capital and retained earnings.
2. Yes, the retained earnings can be converted into capital because the Company has a sufficient amount of retained earnings.
3. Retained earnings are owned or internal sources of financing.  a company saves the part of net profit as a reserve, which is used by the company. Thus, retained earnings are also known as ‘ploughing back of profit.

Solution:

1. The company should offer IPO (Initial Public Offer), as TRI Ltd. Company is a newly incorporated public company and wants to raise capital by selling equity shares to the public.
2. No. The company cannot offer Bonus Shares to raise its capital because Bonus Shares are given to its existing equity shareholders and it is given out of accumulated distributable profits or reserves. Whereas, TRI is a newly incorporated company, so it will not have sufficient profit to give bonus shares.
3. Yes. The company can enter into an Underwriting Agreement with underwriters by paying them a commission. The underwriters assure the company to take up the unsold shares so that the company can raise its minimum subscription.

Solution:

1. In the above case, the board of directors now wants to start the allotment process. Therefore, the company must set up an allotment committee, Allotment committee will decide the basis of allotment and submit a report to the board of directors.
2. At the board meeting, a resolution is passed to allot shares. After passing the resolution, the secretary has to issue a Letter of Allotment to those applicants to whom the company is allotting shares.
3. The company should issue a share certificate within two months from the date of allotment.

Solution:

1. Yes. The company can issue secured and unsecured debentures. But they have to get the approval of shareholders in a general meeting by passing a special resolution.
2. No. All the debentures are redeemable that have to be repaid. Therefore, the company cannot issue irredeemable debentures.
3. As per the Companies Act, 2013, the company cannot issue debentures with voting rights. Debenture holders are the creditors of the company. So, they don’t have normal voting rights. They can vote only on matters related to them.

Solution:

1. Yes, The company can accept deposits in the joint names of depositors. But there should not be more than 3 names.
2. ABC Company Ltd. is an eligible Public Company as per the Companies Act, 2013. So, it can accept deposits from its members as well as from the public.
3. Yes, The company can issue secured deposits. If a company offers secured deposits, it has to create a charge on its tangible assets within 30 days of acceptance of deposits.

Solution:

1. Yes, The company needs to get shareholders’ approval for accepting deposits and the Board of Directors can pass a resolution in a general meeting for the approval of accepting deposits.
2. Yes, The company has to appoint a Debenture Trustee because, if the company wants to issue secured deposits, then it is compulsory to appoint a Debenture Trustee.
3. The company has to create a charge on its tangible assets within 30 days of acceptance of deposits.

Solution:

1. No, the company cannot accept deposits from the public because SUN Pvt. Ltd. is a private limited company. Only eligible public companies and government companies can accept deposits from the public.
2. SUN Pvt. Ltd. is a private limited company. Therefore, it should issue a circular to invite deposits from its members.
3. The maximum period of accepting deposits is 36 months. Therefore, it can accept deposits for a maximum period of 36 months.

Solution:

1. No, Mr. Z cannot deposit his shares in his bank account for Demat.
2. A Demat account is required for converting physical share into electronic holding.
3. No, RBI will not be the custodian of the hare of MR.Z the depository that is NSDL or CDSL will be the custodian of the share of Mr. Z after demating.

Solution:

1. No, Mrs. Z cannot open a Demat account by going to the Mumbai office of NSDL. NSDL is a depository that is like a central bank. She has to open a Demat account with a depository participant (DP).
2. Yes, Mrs. Z has to pay for the opening of the account and its maintenance for availing services of DP.
3. No, she does not have to send the shares to the respective company for demating. She has to send the physical share certificates and Demat requisition form (DRF) in triplicate to the DP.

Solution:

1. The Dividend and Bonus of the investor are automatically credited in case of corporate action under the depository system. So, Mr. S will get his divided through the depository in his bank account which is linked with the depository.
2. The bonus shares also will be received in Demat form and will be directly credited to this Demat Account as Mr. S holds the shares in Demat form.
3. Mr. S is the beneficial owner and so, Mr. S is entitled to the dividend and bonus.

Solution:

1. No, Interim Dividends cannot be paid out of free reserves. Interim Dividend is declared out of profits of the current accounting year.
2. Yes, the Board of Directors has the power to decide and declare the same at the Board Meeting.
3. Yes, the company should distribute the interim dividend within 30 days of its declaration.

Solution:

1. The funds should be transferred to the Dividend Account within 5 days from the date of declaration of interim dividend.
2. The interim dividend must be paid to the shareholders within 30 days from its declaration.
3. The unpaid dividend must be transferred to Unpaid Dividend A/c within 37 days from its declaration.

Solution:

1. Joy ltd. should go to the primary market to issue its shares since it is a newly incorporated company.
2. Joy ltd. wants to raise capital for the first time by issuing equity shares.  So Joy ltd. should offer its shares through a public offer that is Initial Public Offer (IPO).
3. The issue of equity shares by Joy Ltd. Co. will be called IPO which means Initial Public Offer.

Solution:

1. Yes, a company needs to be listed on a stock exchange to sell its securities through the stock exchange.
2. Economics mirror is the term used for referring to a stock exchange’s ability to reflect the economic condition of a country.
3. Liquidity is the term that refers to the function of the stock exchange as a provider of a ready market for sale and purchase of the security

1. Fixed Capital is invested in long-term assets such as land, building, equipment, etc. Fixed capital is the capital invested in fixed assets. It is permanent capital.
2. An investor invests money in fixed capital to make a profit in the future.
3. Fixed capital is usually required at the time of the establishment of the company.
4. However, existing companies may also need such capital for their Expansion and development, Replacement of equipment, etc.
5. Thus, it is rightly justified that, fixed capital stays in the business almost permanently as it is invested in fixed assets.

1. Equity shares are ordinary shares. These are the shares that constitute the major part of the total share of the company.
2. The person holding equity share is known as ‘Equity Shareholder’.
3. Equity Shareholders are the real owners of the company and bear the ultimate risk associated with ownership.
4. They are often described as “Real Master of the company. They enjoy control over the company. They have voting rights and can participate in the management of the company.
5. Thus, it is rightly justified that equity shareholders are the real owners and controllers of the company.

1. The person holding preference share is known as ‘Preference Shareholder’. Preference Shares are those shares that enjoy certain privileges and preferential rights over equity shares.
2. Preference shareholders are preferred before equity shareholders to have their capital returned at the times of the liquidation of the business.
3. Preference Shareholders do not have normal voting rights like equity shares.
4. Therefore, they can vote on any such matter which directly affects their interest/dividends as investors.
5. Thus, it is rightly justified that, preference shares do not carry any voting right.

1. A bond is a debt security. It is a loan. A bond is a formal contract to repay the borrowed money with interest.
2. It is an interest-bearing certificate issued by the government, semi-government, or business firms to raise capital.
3. The person holding such an instrument is known as a bondholder. He/she becomes the creditor of the company.
4. As a bondholder is the creditor of the company, he does not enjoy any voting rights and cannot participate in the management of the company.
5. Thus, it is rightly justified that, the bondholder is a creditor of the company

1. The person holding equity share capital is known as ‘Equity Shareholder’.
2. The dividend received by equity shareholders is fluctuating rate. Also, if a company does not earn profit in a particular year then equity shareholders will not get any dividend.
3. Therefore, Equity shareholders bear the maximum risk in the company. They are described as ‘Shock absorbers’ when a company has a financial crisis.
4. Thus, it is rightly justified that, equity share capital is risk capital.

1. If a company refuses to register the transfer of shares, it shall send a notice of refusal to the transferor and the transferee or to the person giving intimation of such transfer within 30 days from the date on which the instrument of transfer was delivered to the company.
2. The notice should contain a valid reason for such refusal. The Board of Directors has the authority to refuse registration of transfer of shares.
3. A member may appeal to the NCLT against the refusal by the Board within thirty days from the date of receipt of the refusal notice.
4. If no notice is received, the member can appeal within 60 days in case of a Private Company and within 90 days in case of a Public Company.
5. Thus, it is rightly justified that, the Board of Directors can refuse the transfer of shares.

1. Debentures Trustee is a person or institution which protects the interest of the debenture holders. The Trustees become the custodian of the assets on which charge has been created.
2. A company that issues a prospectus or invites more than 500 persons to buy its debentures has to appoint one or more Debentures Trustees.
3. Companies issuing secured debentures also must appoint Debentures Trustee.
4. Debentures Trustee is appointed before prospectus or letter of offer/offer letter is issued or within 60 days after the allotment of the debenture.
5. The Trustees must give written consent to act as Debenture Trustees.
6. Thus, it is rightly justified that, debentures trustee is appointed by a company issuing debentures.

1. Eligible Public companies having a net worth of around ₹100 crores or more or a turnover of ₹500 crores can only accept deposits from the public.
2. Government companies can also accept deposits from the public.
3. A public company can accept deposits from its members or directors only.
4. A private company can accept deposits from its members, directors, or relatives of directors only.
5. An eligible public company can invite or accept deposits from the public only after the publication of an advertisement.
6. Advertisement inviting deposits must be published in English and vernacular language. The advertisement has to be signed by the majority of directors or their authorized agents.
7. Thus, all companies cannot accept deposits from the public.

1. A private company can accept deposits from its members not exceeding 100% of the aggregate of the paid-up share capital and free reserves.
2. A Public Company can accept deposits up to 25% of the aggregate of paid-up capital, free reserves, and securities premium account.
3. An Eligible company can accept deposits up to 25% of paid-up capital, free reserves, and securities premium account from the public.
4. In addition, it can accept deposits up to 10% of the aggregate of paid-up share capital, free reserves, and securities premium account from members.
5. A Government company is eligible to accept deposits under section 76 of the Companies Act, 2013. It can accept deposits up to 35% of paid-up capital, free reserves, and securities premium account from the public.
6. Thus, it is rightly justified that, there is a limit or restriction on the amount that a company can collect as deposits.

1. Under the depository system, shares are kept in electronic form. So, electronic transactions of securities shares save time.
2. It eliminates/reduces the handling of huge volumes of paperwork involved in filing the transfer deeds.
3. and also, it reduces the efforts in filling transfer forms and lodging the documents with the company.
4. Therefore, it is rightly justified that, depository system results in reduced time, cost and efforts.

1. The process of holding securities in electronic form is known as Dematerialization.
2. The depository is the custodian of the securities and it is the most secure and safe way of holding securities.
3. In the physical holding of shares, there is a limitation like certificates can be lost, damaged, stolen, torn, etc. Whereas, securities in electronic mode eliminates the risk which existed in physical holding.
4. Under the depository system, transactions of shares are carried out in electronic form. This process involved in the depository is fast, secure, and safe.
5. So, shares are held in electronic form with depository to avoid fraud, thefts, forgery of shares certificates.
6. Thus, it is rightly justified that, electronic holding of securities is safer than physical holding.

1. Shareholders invest in the company’s shares intending to earn good returns out of the profit that the company made during the year.
2. The shareholder gets dividends as a return on their investment.
3. The shareholder being the owner of the company is entitled to a share in the company’s profits.
4. A dividend is a share of the distributable profits of the company.
5. Thus the dividend is paid out of the profits of the company.

1. A dividend declared by the Board of Directors between two Anual General Metting is called an interim dividend.
2. The interim dividend is paid in the middle of the accounting year.
3. The interim dividend is paid before the finalization of the annual account for the year.
4. Free Reserve is the reserves available for distribution of profits as per the latest audited Balance Sheet of the Company.
5. It is declared out f profits of the current accounting year.
6. Therefore Interim dividends cannot be paid out of free reserves

1. A dividend declared by the Board of Directors between two Anual General Metting is called an interim dividend
2. The interim dividend is paid in the middle of the accounting year that is before the finalization of the annual account for the year.
3. Articles of Association of the company must authorize the board of directors to declare Interim Dividend.
4. Therefore the approval of members is not needed for the interim dividend.

1. The financial market provides a platform where both, buyers and sellers can find each other easily.
2. Investors who have savings are linked with entrepreneurial borrowers that require investment.
3. As a result, the idle funds in the hands of investors can be productively used by corporates.
4. This market enables investors to invest their saving according to their choices and risk assessment.
5. Thus, financial markets act as links between investors and borrowers.

1. The capital market is the market for borrowing and lending long-term capital required by business enterprises.
2. The capital market is the core of a country’s financial system, it helps in the mobilization and optimum use of resources.
3. By Capital market, corporates, industrial organizations, financial institutions access log term funds from both domestic and foreign market
4. The capital market also contributes to capital formation in the economy.
5. Thus the capital market is useful for the corporate sector.

1. SEBI was set up to promote the securities market, protect the interest of the investors in the securities market, and regulate the securities market
2. SEBI issues rules and regulations that are to be followed by the issuers of securities, the intermediaries, and the investors.
3. SEBI is the regulator of all stock exchanges in India.
4. SEBI also registers and regulates the working of stockbrokers, sub-brokers, share transfer agents, bankers to an issue, trustee of the trust deed, register to an issue, merchants, bankers, underwriters, venture capital funds, mutual funds, depositories, and other such intermediaries who may be associated with securities market.
5. Therefore the Securities and Exchange Board of India(SEBI) is the regulator for the securities market in India.

1. The Stock exchange is a place where different types of securities are purchased and sold.
2. Securities of different companies that give a good return on investment.
3. Thus companies also try to invest in the most productive investment projects to give good returns on investors’ money.
4. This leads to capital formation and economic growth.
5. Therefore, the stock exchange work for the growth of the Indian economy.