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Raising Money and Investing Quiz

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Questions and Answers

What are the two main ways in which a business can raise money?

Savings and borrowing

Equity and debt (correct)

Loans and investments

Bonds and stocks

What is the key difference between raising money through equity versus debt?

Equity represents ownership, while debt is just borrowing. (correct)

Equity is only for new owners, while debt is for existing owners.

Equity is riskier than debt.

Equity is more expensive than debt.

What is the main purpose of a company issuing common shares/stock?

To raise money from existing owners.

To pay dividends to shareholders.

To represent ownership in the company. (correct)

To obtain loans from the government.

Which of the following is not considered a type of equity instrument?

Bonds Signup and view all the answers

What is the key difference between investing through equity versus lending through debt?

Equity investors own a portion of the company, while debt lenders are just creditors. Signup and view all the answers

What is the relevance of the face value or par value of common shares?

It is set by the company and has no real relevance. Signup and view all the answers

According to the passage, how are common shares recorded in the balance sheet?

At their face value Signup and view all the answers

What is the main difference between common shares and preference shares?

Preference shares have a fixed dividend rate while common shares have variable dividends Signup and view all the answers

What is the main reason a company issues preference shares?

To attract investors who want a fixed rate of return Signup and view all the answers

What is the main advantage of a company issuing ADRs/GDRs?

It increases the company's visibility and credibility in foreign markets Signup and view all the answers

What is the main disadvantage of preference shares compared to common shares?

Preference shareholders have a fixed dividend rate Signup and view all the answers

What is the main reason a company would issue ADRs/GDRs?

To increase visibility and credibility in foreign markets Signup and view all the answers