Finance Fundamentals Quiz

A short-term funding source used by companies.

The minimum time a company must hold deposits for.

A central location that securely stores digital securities.

The process of converting physical securities into electronic form.

The process of converting electronic securities into physical form.

A unique code that identifies a specific security.

A payment made to shareholders based on company profits.

A type of dividend paid to shareholders at a set rate.

Shares are offered to the public for the first time.

The process where shares are offered to existing shareholders at a discounted price.

Shares are offered to a select group of individuals, typically less than 200.

The price of shares is determined through bidding, giving investors a chance to set the price.

Shares are offered free of charge to existing shareholders.

Shares are offered to employees, directors, and officers to incentivize them.

A company can issue convertible debentures that can be converted into equity shares.

A company cannot issue debentures with voting rights.

The maximum duration for which a deposit can be accepted by a company is 36 months.

A company uses circulars or advertisements to invite members to participate in its deposit scheme.

A company must wait at least 21 days after filing with the Registrar of Companies before issuing circulars or advertisements for deposit schemes.

To safeguard the interests of depositors, a company has to appoint Deposit Trustees.

A company creates a charge on its assets when issuing secured deposits, providing an added layer of security for depositors.

Deposit Receipts are issued within 7 days of receiving a deposit.

For premature withdrawal of a deposit, a company might deduct 1% of the interest earned.

Every year, companies must file a return of deposits on or before 31st March.

Finance is the management of all the monetary affairs of a company, ensuring the best use of funds for growth and profitability.

Corporation finance focuses on how businesses acquire and utilize funds for their operations and growth.

Fixed capital refers to any type of fixed asset that a company owns, such as buildings, machinery, or land. This asset provides long-term value and helps the business operate.

Working capital refers to the excess of current assets (cash, inventory) over current liabilities (short-term debts). It's the money a company uses to finance its daily operations.

Capital Structure refers to a company's mix of different funding sources, including debt, equity, and retained earnings, that are used to finance its operations.

A share is the smallest unit of ownership in a company's total share capital. It represents a portion of the business and grants the holder voting rights and potential dividends.

Depository Receipts are financial instruments that represent ownership in a foreign company's shares. They allow companies to raise capital in international markets, making investment easier for global investors.

Shareholders are the 'residual claimants' of a company. They are entitled to the profits left over after all debts and expenses are paid, and they also bear the risk of losses.

A reserve fund created by a company to ensure the redemption of its debentures (bonds) at maturity.

A legal document stating the terms and conditions of a debenture, including the debenture holder's rights and the issuer's obligations.

Deposits are considered external sources of financing, as they represent funds provided by outsiders.

A depository system provides a secure, electronic way to hold securities, eliminating the need for physical certificates. It makes the market operate without physical paper.

India has a multi-depository system, with multiple organizations providing services to hold securities electronically.

Demat accounts are opened and maintained by a Depository Participant (DP), not directly by the Depository itself.

A company is in default if it fails to pay declared dividends within 30 days.

Unpaid dividends should be transferred to a separate "Unpaid Dividend Account", not the Debenture Reserve Account.

A company must transfer unpaid dividends to the Investor Education and Protection Fund (IEPF) after 7 years, not 30 days.

A newly incorporated company should issue shares in the primary market to raise capital for the first time.

A newly incorporated company should offer its shares through a public offer, not a rights issue, because rights issues are for existing shareholders.

The first issue of equity shares by a company is called an Initial Public Offering (IPO).

Certificates of Deposit (CDs) are suitable for short-term investments because they come in multiples of lakhs and have a maturity period between 7 days and 1 year.

Treasury Bills are suitable for short-term investments, although they may be less attractive due to potential higher interest rates on government securities.