SP Question Bank XII With Answers PDF

JAI HIND COLLEGE, BASANTSING INSTITUTE OF SCIENCE & J.T. LALVANI COLLEGE OF COMMERCE, CHURCHGATE, MUMBAI 400020. QUESTION BANK PREPARATIONS FOR ABT CLASS : S.Y.J.C. SUBJECT : S.P. A) Select the correct answer from the options give...

JAI HIND COLLEGE, BASANTSING INSTITUTE OF SCIENCE & J.T. LALVANI COLLEGE OF COMMERCE, CHURCHGATE, MUMBAI 400020. QUESTION BANK PREPARATIONS FOR ABT CLASS : S.Y.J.C. SUBJECT : S.P. A) Select the correct answer from the options given below and rewrite the statements (All answers are highlighted in red) (It is compulsory to rewrite the statements with correct answers underlined) 1................... is related to money and money management. a) Production b) Marketing c) Finance 2. Finance is the management of................. affairs of the company. a) monetary b) marketing c) production 3. Corporation finance deals with the acquisition and use of.................. by business corporation. a) goods b) capital c) land 4. Company has to pay................. to t h e government. a) taxes b) dividend c) interest 5.................. refers to any kind of fixed assets. a) Authorised capital b) Issued capital c) Fixed capital 6.................. refers to the excess of current assets over current liabilities. a) Working capital b) Paid-up capital c) Subscribed capital. 7. Manufacturing industries have to invest.................. amount of funds to acquire fixed assets. a) huge b) less c) minimal 8. When the population is increasing at high rate, certain manufacturers find this as an opportunity to business. a) close b) expand c) contract 9. The sum of all................. is gross working capital. a) expenses b) current assets c) current liabilities 10.................. means mix up of various sources of funds in desired proportion. a) Capital budgeting b) Capital structure c) Capital good 11.................. is a smallest unit in the total share capital of the company. a) Debenture b) Bonds c) Share 12. The benefit of Depository Receipt is ability to raise capital in __________market. a) National b) Local c) International 13.................. are residual claimants against the income or assets of the company. a) Bondholders b) Equity Shareholders c) Debenture holders 14.................. participate in the management of their company. a) Preference shareholders b) Depositors c) Equity shareholders 15.................. shares are issued free of cost to existing equity shareholders. a) Bonus b) Right c) Equity 16. The holder of preference share has right to receive................. rate of divided. a) fixed b) fluctuating c) lower 17. Accumulated dividend is paid to................. preference shares. a) redeemable b) cumulative c) convertible 18. The holder of................. preference shares have right to convert their shares into equity shares. a) cumulative b) convertible c) redeemable 19. Debenture holders are................. of the company. a) creditors b) owners c) suppliers 20.................. is paid on borrowed capital. a) Interest b) Discount c) Dividend 21. Debenture holders get fixed rate of................. as return on their investment. a) interest b) dividend c) discount 22. Convertible debentures are converted into................. after a specific period. a) equity shares b) deposits c) bonds 23. Retained earnings are................. source of financing. a) internal b) external c) additional 24. The holder of bond is................. of the company.  a) secretary b) owner c) creditor 25. Company can accept deposits from public, minimum for ____months. a) six b) nine c) twelve 16. Company can accept deposits from public, maximum for ___months. a) 12 b) 24 c) 36 17. A depository receipt traded in................. is called American Depository receipt. a) London b) Japan c) U.S.A. 18................... refers to capital made up of Equity and preference shares a) Share capital b) Debt capital c) Reserve fund 19.................. capital refers to maximum capital a company can raise by issuing shares. a) Issued b) Authorised c) Paid up 20................... means shares are offered to the public. a) Rights Issue b) Private Placement c) Public Issue 21. Under.................. method, issue price of shares is based on bidding. a) Book Building b) Fixed Price c) Bonus Issue 22. In.................., shares of a company are offered to the public for the first time. a) Further Public Offer b) Initial Public Offer c) Public Offer 23................... is offered to existing equity shareholders. a) IPO b) ESOS c) Rights Issue 24. Bonus shares are issued free of cost to................... a) existing Equity shareholders b) existing employees c) Directors 25................... are offered to permanent employees, Directors and Officers of a company. a) Bonus Shares b) Rights Issue c) ESOS 26. Under _______, a company offers its securities to a select group of persons not exceeding 200. a) Private Placement b) IPO c) Public Offer 27. The.................. have the power to allot shares. a) Director b) Board of Directors c) Company Secretary 28. Letter of.................. is sent to applicants who have been given shares by the company. a) Regret b) Renunciation c) Allotment 29................... is a proof of title to Shares. a) Share Certificate b) Register of Member c) Letter of Allotment 30. The gap between two calls should not be less than................... a) 14 days b) One month c) 21 days 31. Company can.................. shares on non-payment of calls. a) forfeit b) surrender c) allot 32. Voluntarily giving away one’s share to another person is called as.................. of shares. a) Transfer b) Transmission c) Surrender 33................... of shares takes place due to operation of law. a) Forfeiture b) Allotment c) Transmission 34. A company cannot issue.................. with voting rights. a) Equity shares b) Debentures c) Securities 35. A company can issue.................. convertible debentures. a) Only partly b) Only fully c) Partly or fully 36. Money from.................. Account is used for redemption of debentures a) Capital b) Debenture Redemption Reserve c) Profit or loss 37................... protects the interest of debenture holders a) Debenture Trustees b) Debenture holders c) Redemption Reserve 38. Secured debentures must be redeemed within.................. from the date of its issue a) 10 days b) 10 years c) 15 years 39. A company issuing ___________debenture must create a charge on the assets of the company. a) Secured b) Unsecured c) Redeemable 40. Debenture certificate must be issued within.................. of allotment of debentures. a) 3 months b) 6 months c) 60 days 41. The details of allotment of Debentures must be entered in................... a) Register of debenture b) Register of members c) Register of creditors 42. A company which issues prospectus or invites more than 500 persons to buy its debenture has to appoint................... a) Register of companies b) Debenture holders c) Debenture trustees 43. The contract between company and Debenture trustees of companies is called as.................. a) Debenture trust deed b) Letter of offer c) Prospectus 44. Procedure for allotment of Debenture should be completed within.................. from the date of receipt of applications. a) 6 months b) 3 months c) 60 days 45. Deposit is a type of.................................................. a) Owned capital b) Short term loan c) Long term loan 46. Eligible public company and Government Company can collect deposits from......................... a) It’s employees b) Public c) RBI 47. Private company can accept deposits from its member or Directors upto not more than................... % of its aggregate of paid-up share Capital and free reserves. a) 100 b) 35 c) 25 48. A................... Company can accept deposits from public not exceeding 35% of its paid-up share Capital and free reserves. a) Government b) Private c) Eligible Public 49. Deposit can be accepted for a minimum of 6 months and maximum for____ months. a) 36 b) 3 c) 30 50. Company issues........................................... to invite its members to subscribe for its deposit scheme. a) Advertisement b) Circular c) Newspaper 51. Company can issue circular or advertisement for inviting deposits after............. days of filing it with Registrar of Companies. a) 30 b) 21 c) 7 52. Company has to appoint..................................... to protect the interest of depositors. a) Debenture Trustees b) Deposit Trustees c) Credit Rating Agency 53. Charge on assets is to be created when a company issues........................ a) Unsecured deposit b) Unsecured Debenture c) Secured deposit 54. Deposit Receipt is issued within............. days of receipt of deposit. a) 7 b) 30 c) 21 55. For premature repayment of deposit, company deducts........................ % of interest. a)1 b) 18 c) 20 56. Return of deposit must be filed every year on or before........................ a) 30th June b) 31 st March c) 30 th April 57. Directors are the................... a) paid employee of the company b) representatives of the share holders c) creditors of the company 58. Dividend is to be paid to the shareholders within ____days from the date of declaration. a) 30 b) 40 c) 20 59. Registered shareholders receive dividend through _________warrant. a) share b) debenture c) dividend 60. Shares issued free of cost to the shareholders are known as ________ shares. a) preference b) equity c) bonus 61. Share Certificate should be ready for delivery by the company within ____months after the allotment of shares. a) 3 b) 5 c) 2 62. Secretarial correspondence with members should be.................. a) lengthy b) shortcut c) prompt and precise 63. Dividend is recommended by.................. a) Board of Directors b) shareholders c) Depositors 64. Dividend is paid out of................. of the company. a) Capital b) Building Fund c) Profit 65.................. is issued by the company to its registered shareholders after the declaration of dividend at the Annual General Meeting of the company. a) Dividend Warrant b) Interest Warrant c) Share Warrant 66. Debenture capital is a.................. capital of a company. a) borrowed b) owned c) permanent 67. Debenture holders are................. of the company. a) Owners b) Creditors c) Debtors 68. Borrowed Capital is provided to the company by...................... a) Equity shareholder b) Debenture holder c) Preference shareholder 69. Interest on Registered Debentures is given through.................. a) Interest coupons b) Interest warrant c) Refund order 70.................. are the creditors of the company. a) Shareholders b) Debenture holders c) Directors 71. Bearer Debenture holders get interest through............................ a) Interest Warrants b) Refund orders c) Interest coupons 72. Return of income on debentures is................. at fixed rate. a) Dividend b) Loan c) Interest 73.................. is an acknowledgement of debt issued by the company under common seal. a) Debentures b) Shares c) Reserve 74. Debentures repayable after a certain period are debentures. a) Convertible b) Registered c) Redeemable 75. The rate of interest payable on debentures is.................. a) uncertain b) floating c) fixed 76. Debenture holders receive............................ certificate from the company. a) Share b) Bond c) Debenture 77. Interest warrants are sent to............................ of the company. a) Shareholders b) Debenture holders c) Owners 78. Depositors are.......................... of a company. a) Members b) Creditors c) Debtors 79. Depositors provide.......................... Capital to the company. a) Short Term b) Long Term c) Medium term 80. Deposits are.......................... loans of the company. a) fixed b) short term c) long term 81. Public Deposits are accepted to meet the ___________requirement of Capital. a) fixed b) working c) owned 82........................... has the power to invite deposits from Public. a) Shareholders b) Auditors c) Board of Directors 83. Rate of interest on deposits is........................... a) fixed b) fluctuating c) moderate 84. The return or income for the investment of money on deposits is called........................... a) Dividend b) Interest c) Discount 85. In physical mode, securities are held in __________form. a) Paper b) Dematerialization c) Electronic 86. Risk of losing certificates exists in _______________mode. a) Physical b) Dematerialised c) Digital 87. In Depository System, securities are held in __________form. a) Scrip based b) electronic c) Physical 88........................................ is the institute which facilitates electronic holding of securities. a) Depository participant b) Issuer c) Depository 89. There is no payment of................. when securities are demated. a) Octroi b) Wealth Tax c) Stamp Duty 90. Depository Act was passed in....................................... a) 1919 b) 1996 c) 1999 91. India has a....................... depository system. a) sole b) multi c) single 92........................ is a constituent of depository system. a) Government b) Issuer c) Trust 93........................ is the oldest depository in India. a) Dow Jones b) NSDL c) CDSL 94. Demat account is opened by........................ a) Beneficial Owner b) CDSL c) SEBI 95. Demated shares are........................ a) Non-transferable b) Fungible c) Bearer 96........................ is a unique code given to a security. a) IBM b) BBM C) ISIN 97. In India ISIN for corporate securities is allotted by....................... a) NSDL b) Central Govt. c) State Govt. 98........................ has to apply for ISIN. a) Company b) Depository participant c) Depositors 99........................ has to pay charges to maintain Demat Account. a) Investor b) Issuer c) Depository 100. NSDL is promoted by....................... a) NSE b) BSE c) FTSE 101. CDSL is promoted by....................... a) NSE (b) BSE c) FTSE 103. Interim Dividend is declared by................................... a) Board of Directors b) Debenture holders c) Depositors 104. Final Dividend is declared by................................... a) Board of Directors b) Shareholders c) Depositors 105. Dividend cannot be declared out of................................... a) Capital b) Profit c) Reserves 106. Dividend amount should be transferred in a separate Bank Account within.................... days of its declaration. a) 5 b) 15 c) 50 107. Dividend should be paid within.................................. days of its declaration. a) 3 b) 13 c) 30 108....................... holders get dividend from residual profits. a) Equity share b) Preference share c) Debenture 109. Dividend is paid first to __________________shareholders. a) Equity b) Preference c) Deferred 110....................... warrant is a cheque containing dividend amount sent by company to the shareholders. a) Dividend b) Share c) Interest 111. IEPF is created by...................... where unpaid dividend is transferred by company. a) Central Govt. b) Company c) Shareholders 112. Payment of...................... Dividend must be authorised by the Articles of Association. a) Interim b) Final c) Bonus 113...................... is a return paid to creditors by the company. a) Dividend b) Interest c) Rent 114...................... is not linked to profits of the company. a) Dividend b) Interest c) Bonus 115. A financial market is a market in which people trade................. and derivatives at low transaction costs. a) Gold b) Financial securities c) Commodities 116. When the trade bills are accepted by commercial banks it is known as................. a) Treasury bills b) Commercial bills c) Commercial papers 117. Money market is a market for lending and borrowing of funds for term. a) short b) medium c) long 118. Central Government is a borrower in the money market through the issue of................. a) Commercial Papers b) Trade Bills c) Treasury Bills 119. ______________is the market for borrowing and lending long term capital required by business enterprises. a) Money Market b) Capital Market c) Gold Market 120. A stock exchange is where stock brokers and traders can buy and sell.................... a) gold b) securities c) goods 121. The........................is the first stock exchange to be recognized by the Indian Government under the Securities Contracts (Regulation) Act. a) BSE b) NSE c) OTCEI 122.................................. is a dealer in stock exchange who carries on trading of securities in his own name. a) Jobber b) Broker c) Bull 123. A.................................. who expects fall in price of a securities. a) bull b) bear c) jobber 124. The practice of buying and selling within the same trading day before the close of the market on that day is called.................................. a) insider trading b) day trading c) auction B. Find the odd one. (just write the odd one in the answer) 1. Land and Building, Plant and Machinery, Cash. Ans. Cash 2. Debenture Capital, Equity Share Capital, Preference Share Capital. 3. Fixed Capital, Capital Structure, Working Capital. 4. Debenture, Public deposit, Retained earnings. 5. Face value, Market value, Redemption value. 6. Share Certificate, Debenture Certificate, ADR. 7. Trade Credit, Overdraft, Cash Credit. 8. Authorised capital, Equity share capital, Issued capital, Paidup capital. 9. ESOS, ESPS, Rights Shares, Sweat Equity. 10. Floor Price, Cap price, Cut-off price, Face Value. 11. Bonus shares, Rights Shares, ESOS. 12. Allotment of shares, Forfeiture of shares, Surrender of shares. 13. Debenture holders, Interest, Dividend. 14. Debenture Trustees, Court, NCLT. 15. Secured Debentures, Convertible debentures, Irredeemable debentures. 16. Debenture trustees, Trust Deed, Shareholders. 17. Private company, Eligible public company, Government company. 18. Deposit Trustee, Deposit Trust Deed, Special Resolution. 19. Appointment of Deposit Trustee, Appointment of Registrar of companies, Appointment of Credit Rating Agency. 20. Secrecy Dividend, Interest. 21. Bonus Letter, Dividend Letter, Board of Directors 22. Dividend Warrant, Interest Warrant, Demat 23. Secretary, Board of Directors, Dividend, Lucid Language, Credit Rating Agency. 24. Depository, Interest, Dividend 25. Interest warrant, Dividend Warrant, Demat 26. Debentureholder, Shareholder, Dematerialisation 27. Debentureholder, Shareholder, SEBI 28. Dividend, Depositor, Deposit Receipt 29. Trust Deed, Depository, Deposit Receipt 30. Elimination of storage of Certificates, Theft of Certificates, Torn Certificates. 31. NSDL, CDSL, NBFC 32. Depository, DP, RBI. 33. DP, BO, State Government. 34. Issuer, BO, Central Government. 35. Final Dividend, Interim Dividend, Interest. 36. Out of Capital, Out of free reserve, Out of money given by government. 37. Dividend Account, Dividend Mandate, unpaid/unclaimed dividend Account. 38. Dividend warrant, Dividend Mandate, Cheque. 39. DRF, RRF, PPF C) Complete the sentences. (Write complete sentence and underline the answer) 1. Initial planning of capital requirement is made by Company’s Promoters. 2. When there is boom in economy, sales will Increase. 3. The process of converting raw material into finished goods is called Production cycle 4. During recession period sales will decrease. 5. The finance needed by business organisation is termed as capital. 6. The convertible preference share holders have a right to convert their shares into equity shares. 7. Equity shareholders elect their representatives called Directors. 8. Bonus shares are issued as gift to equity shareholders. 9. The bond holders are creditors of the company. 10. Depository receipt traded in a country other than USA is called Global Depository Receipt 11. First Industrial policy was declared in the year 1948. 12. When goods are delivered by supplier to customer on basis of deferred payment it is called as Trade credit. 13. Share capital refers to capital made up of Equity shares and Preference shares. 14. Reserve capital is part of Uncalled capital. 15. Transfer of shares due to death, insolvency or insanity of member is called Transmission of shares. 16. The two parties involved in transfer of shares are transferor and transferee. 17. Voluntarily giving up of shares by a member due to inability to pay calls is called Surrender of shares. 18. Company can forfeit only partly paid up shares. 19. In case the original Share Certificate is torn or mutilated, company can issue duplicate share certificate. 20. In case of transfer of shares, company has to issue to the transferee a new share certificate Within 1 month of date of receipt of instrument of transfer. 21. Letter sent to applicants for informing them shares are allotted is called as letter of Allotment. 22. When applications received are more than the number of shares offered, it is called as Over subscription. 23. In Book Building Method, the final price at which shares are offered to investors is called as Cut off price 24. Shares issued free of cost to existing Equity shareholders is called as Bonus shares. 25. A legal instrument conveying the assets of a company to the Debenture trustees is called Debenture Trust Deed. 26. To protect the interest of Debenture holders, a company appoints Debenture Trustee. 27. On receipt of application and money, the procedure for allotment of debentures should be completed within 60 days. 28. Authority to create charge on company’s assets is with the Board of Directors. 29. Secured debentures should be redeemed within 10 years from date of its issue. 30. To stop a company from incurring further liabilities, the Debenture trustee can approach NCLT. 31. A company which issues prospectus or invites more than 500 persons to subscribe for its debentures, has to appoint Debenture Trustee. 32. Return on investment on debenture is called Interest. 33. For public issue of debentures of ` 100 crores, minimum subscription should be 75% of the issue. 34. For public issue or rights issue of convertible debentures, as per SEBI, a company must obtain Credit rating. 35. Deposit is a type of short term loan. 36. Eligible Public company and Govt. Company can accept deposits from Public. 37. To collect deposits from public, Eligible public company must have a net worth of not less than 100 crores 38. A Government company can accept deposits from public not exceeding 35% of its paid-up share capital and free reserve. 39. Deposits can be accepted or renewed for a period not less than 6 months and not more than 36 months. 40. Company cannot accept or renew deposits repayable on Demand. 41. Premature repayment of deposits can be done by a company but not before 3 months. 42. To invite the public to subscribe for its deposits, a company issues Advertisement. 43. Agency which gives ratings of the deposits of a company is called Credit rating agency. 44. Account which is used only for repaying deposits is called Deposit Repayment Reserve Account 45. Dividend is recommended by Board of Directors. 46. A company capitalises its Reserve Fund for issue of Bonus shares. 47. Payment of dividend must be made within 30 days of its declaration. 48. Dividend is approved by the Shareholders in the Annual General Meeting. 49. The Secretary has to communicate the decisions of the management to the members by conducting correspondence. 50. Debenture holder is a creditor of the company. 51. Company issues Debenture certificate to the debenture holder after allotment of Debentures. 52. Debenture holder gets Interest at fixed rate as a return or income. 53. In case of Registered Debentures, Interest Warrant are used to pay interest. 54. The Secretary has to correspond with debenture holders on important occasions. 55. The person who purchases the debentures of a company is called Debenture holder. 56. Interest does not depend upon profits of the company. 57. Company cannot issue debentures with Voting rights. 58. Debenture certificate should be issued within a period of 6 months, from the date of allotment of debentures. 59. A company cannot issue debentures to more than 500 people without appointing a Debenture Trustee. 60. The power to issue debentures has been vested with the Board of Directors. 61. Depositors are the Creditors of the company. 62. The Secretary must be cautious and careful while writing letters to the depositors. 63. Deposit is a short term source of finance of the company. 64. A company can accept deposits for the minimum period of 6 months. 65. Depositors are entitled to receive Interest at fixed rate. 66. Central location for keeping securities in demated form is Depository. 67. Freezing of debit/credit of securities is possible in Depository/Depository system 68. First Depository of the world started in the year 1947. 69. The Indian Depository Act was passed in the year 1996. 70. Link between Depository and Investor is Depository Participant(DP) 71. Account of securities of the Investors is maintained by Depository Participant(DP) 72. The process which converts physical securities in electronic form is Dematerialization. 73. The process which converts digital securities in physical form is Rematerialization. 74. The Issuer company must register with Depository. 75. The unique code identifying a security is ISIN 76. The first depository of India is NSDL. 77. Word dividend is derived from Latin term Dividendum 78. Dividend is paid to Registered shareholders 79. Dividend can be declared only on recommendation of Board of Directors 80. Dividend must be paid in cash. 8. The meeting at which final dividend is approved is Annual General Meeting. 82. Dividend cannot be paid out of Capital. 83. Interim dividend is decided and declared by Board of Directors. 84. Predecided and a fixed rate of dividend is paid to Preference shareholders 85. Payment of dividend must be completed within 30 days. 86. Payment of Interim Dividend needs to be authorized by Articles of Association. 87. The obligatory payment made by company to its creditors is called as Interest. D) Correct the underlined word/s and rewrite the following sentences. (REWRITE THE SENTENCES WITH CORRECTED WORD UNDERLINED) 1. Finance is needed to pay dividend to debenture holders. 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 acknowledgement of loan raised by company. 4. Equity shares carry dividend at fixed rate. Ans. Preference shares carry dividend at fixed rate. 5. Owned capital is temporary capital. Ans. Owned capital is Permanent capital. 6. Equity shares get dividend at fixed rate. Ans. Equity shares get dividend at fluctuating rate. 7. Preference shares get dividend at fluctuating rate. Ans. Preference shares get dividend at fixed rate. 8. Retained earnings is an external sources of finance. Ans. Retained earnings is an internal sources of finance. 9. Debenture holder is owner of the company. Ans. Debenture holder is creditor of the company. 10. Bond is a source of short term finance. Ans. Bond is a source of Long term finance 11. Depository Receipt traded in USA is called as Global Depository Receipt. Ans. Depository Receipt traded in USA is called as American Depository Receipt. 12. 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. 14. 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. 15. 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. 16. Only fully paid up shares can be forfeited. Ans. Only partly paid up shares can be forfeited. 17. Bonus shares are offered to existing employees of a company. Ans. Bonus shares are offered to existing shareholders of a company. 18. Company enters into an underwriting agreement with the shareholders. Ans. Company enters into an underwriting agreement with the Underwriters. 19. 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. 20. Duplicate share certificate must be issued within one month from date of application. Ans. Duplicate share certificate must be issued within three month from date of application 21. Call money cannot exceed 5% of nominal value of shares. Ans. Call money cannot exceed 25% of nominal value of shares. 22. The details of debentureholders are entered in Register of Members. Ans. The details of debentureholders are entered in Register of Debenture holders. 23. Secured debentures must be redeemed within 15 years from the date of its issue. Ans. Secured debentures must be redeemed within 10 years from the date of its issue. 24. 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. 25. Return on investment on debentures is dividend. Ans. Return on investment on debentures is Interest. 26. Debenture Trustees redress the grievances of shareholders. Ans. Debenture Trustees redress the grievances of debenture holders. 27. Debenture certificates are issued within 3 months of allotment of debentures. Ans. Debenture certificates are issued within 6 months of allotment of debentures. 28. 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 applications. 29. Government Company can accept deposit from members. Ans. Government Company can accept deposit from Public. 30. 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. 31. Company appoints Credit Rating Agency to protect the interest of Depositors. Ans. Company appoints Debenture Trustee to protect the interest of Depositors. 32. 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. 33. 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. 34. Charge on assets is created when company issues unsecured deposit. Ans. Charge on assets is created when company issues secured deposit. 35. Minimum tenure of deposit is 36 months. Ans. Minimum tenure of deposit is 6 months 36. To rate its debentures a company appoints underwriters. Ans. To rate its debentures a company appoints Credit rating Agency. 37. Dividend is recommended by shareholders. Ans. Dividend is recommended by Board of Directors. 38. The person who purchases shares of the company is called Depositor. Ans. The person who purchases shares of the company is called shareholder. 39. 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. 40. 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. 41. 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. 42. A Share Certificate must be issued after allotment of debentures. Ans. A Share Certificate must be issued after allotment of shares. 43. 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. 44. A Demat Request Form is sent alongwith the letter of Redemption of Debentures. Ans. A Debenture Redemption Form is sent alongwith the letter of Redemption of Debentures. 45. 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. 46. Deposits are the internal source of financing. Ans. Deposits are the external source of financing. 47. Electronic mode of holding securities is risky. Ans. Physical mode of holding securities is risky. 48. Allotment and Transfer of securities is time consuming in electronic mode. Ans. Allotment and Transfer of securities is time consuming in Physical mode. 49. Banking system leads to a scrip less capital market. Ans. Depository system leads to a scrip less capital market. 50. Storage of Certificates is not required in Physical mode of holding Ans. Storage of Certificates is not required in electronic mode of holding 51. India has a single Depository system. Ans. India has a multi Depository system. 52. Depository Participant in India has to register under the partnership act. Ans. Depository Participant in India has to register under the SEBI act. 53. Demat accounts are opened and maintained by the Depository. Ans. Demat accounts are opened and maintained by the DP. 54. Securities are fungible in Physical mode. Ans. Securities are fungible in electronic mode. 55. ISIN is a code given to a company. Ans. ISIN is a code given to Securities. 56. ISIN of Indian Government securities is issued by NSDL. Ans. ISIN of Indian Government securities is issued by RBI. 57. Dividend is paid to creditors. Ans. Dividend is paid to Registered shareholders. 58. Interest is paid to shareholders. Ans. Dividend is paid to shareholders. 59. Final Dividend is paid between two AGMs. Ans. Interim Dividend is paid between two AGMs. 60. Special Resolution must be passed to declare Final Dividend. Ans. Ordinary Resolution must be passed to declare Final Dividend. 61. Dividend must be paid within 60 days of its declaration. Ans. Dividend must be paid within 30 days of its declaration. 62. 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. 63. 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. 64. Preference shareholders are given the last priority in payment of dividend. Ans. Equity shareholders are given the last priority in payment of dividend 65. Preference shareholders get dividend from residual profits. Ans. Equity shareholders get dividend from residual profits. 66. Dividend is payable every year irrespective of profits made by company. Ans. Interest is payable every year irrespective of profits made by company. 67. In Primary market, already existing securities are traded. Ans. In Secondary market, already existing securities are traded. 68.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. 69.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. 70. Financial market can be classified as capital market and call money market. Ans. Financial market can be classified as capital market and money market. 71. 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 Investors in the securities market. 72. A Broker cannot directly deal with investors. Ans. A Jobber cannot directly deal with investors. 73. A Bear expects the prices of shares to rise in future. Ans. A Bull expects the prices of shares to rise in future. 74. A Bull buys new issues of securities from primary market. Ans. A stag buys new issues of securities from primary market. 75. A stock market is an important constituents of money market. Ans. A stock market is an important constituents of Capital market E) Arrange in proper order. 1. a) Forfeiture of shares b) Calls on shares c) Allotment of shares. Ans. 1. c) Allotment of shares b) Calls on shares a) Forfeiture of shares 3. b) Application form c) Minimum subscription a) Return of allotment Ans. c) Application form b) Allotment letter a) Share certificate 3. a) Return of allotment b) Application form c) Minimum subscription Ans. a) Share certificate b) Allotment letter c) Application form 4. a. Obtain Credit Rating b. Entry in register of debenture c. Receive application with money Ans. a. Obtain Credit Rating c. Receive application with money, b. Entry in register of Debenture 5. a. Issue debenture certificate b. Issue prospectus c. Open bank Account Ans. b. Issue prospectus, c. Open Bank Account, a. Issue Debenture Certificate 6. a. Hold Board Meeting for allotment b. Issue debenture certificate c. Receive application with money Ans. c. Receive application with money, a. Hold Board Meeting for allotment b. Issue debenture certificate. 7. a. Appoint Deposit Trustee b. Hold General Meeting c. Create charge on assets. Ans. c. Receive application with money, a. Hold Board Meeting for allotment b. Issue debenture certificate. 8. a. File Return of deposit b. Issue Deposit Receipt c. Issue advertisement. Ans. c. Issue Advertisement, b. Issue Deposit Receipt a. File Return of deposit 9. a. Obtain Credit Rating b. Entries in Register of Deposits c. Issue Deposit Receipt. Ans. a. Obtain Credit Rating, c. Issue Deposit Receipt, b. Entries in Register of Deposits 10. a) Allotment of shares b) Application for shares c) Share certificate Ans. b) Application for shares, a) Allotment of shares, c) Share certificate 11. a) Member b) Applicant c) Bonus shares Ans. b) Applicant, a) Member, c) Bonus shares 12. a) Board Resolution b) Allotment of Debentures c) Board meeting Ans. c) Board meeting, a) Board Resolution, b) Allotment of Debentures. 13. a) Interest warrant b) Allotment of Debentures c) Board meeting Ans. c) Board meeting, b) Allotment of Debentures, a) Interest warrant 14. a. Renewal of Deposit b. Acceptance of Deposits c. Deposit Receipt Ans. b. Acceptance of Deposits, c. Deposit Receipt, a. Renewal of Deposit 15. a. Payment of Interest b. Deposit Receipt c. Acceptance of Deposits Ans. c. Acceptance of Deposits, b. Deposit Receipt, a. Payment of Interest. 16. a) Gets Statement of Accounts b) Open Demat Account c) Submit DRF Ans. b) Open Demat Account, c) Submit DRF, a) Gets Statement of Accounts 17. a) Investor (BO) submits application for securities to issuer company. b) Depository intimates the DP about crediting BO’s Account. c) Issuer company gives details of allotment to Depository. Ans. a) Investor (BO) submits application for securities to issuer company c) Issuer company gives details of allotment to Depository b) Depository intimates the DP about crediting BO’s Account. 18. a) Recommendation of Dividend b) Checking sufficiency of profits c) Board Meeting Ans. b) Checking sufficiency of profits, c) Board Meeting, a) Recommendation of Dividend 19. a) Transfer to Dividend Account b) Transfer to IEPF c) Transfer to Unpaid Dividend Account Ans. a) Transfer to Dividend Account, c) Transfer to Unpaid Dividend Account, b) Transfer to IEPF. 20. a) Closure of Register of Members. b) Intimate Stock Exchange of Board Meeting. c) Intimate Stock Exchange of declaration of dividend. Ans. b) Intimate Stock Exchange of Board Meeting, c) Intimate Stock Exchange of declaration of dividend, a) Closure of Register of Members. 21. a) Decision on Rate of Dividend b) Transfer to IEPF c) Payment of Dividend. Ans. a) Decision on Rate of Dividend, c) Payment of Dividend, b) Transfer to IEPF. 22. a) Payment of Interim Dividend b) Board meeting deciding and declaring Interim Dividend. c) Authorization of Articles of Association. Ans. c) Authorization of Articles of Association, b) Board meeting deciding and declaring Interim Dividend, a) Payment of Interim Dividend. Q.2 Study the following case / situation and express your opinion. (express your opinion or views in complete sentences) (1) The management of ‘Maharashtra State Road Transport Corporation’, wants to determine the size of working capital. a. Being a public utility service provider, will it need less working capital or more ? Ans. Being a public utility service provider, it will need less working capital b. Being a public utility service provider, will it need more Fixed Capital ? Ans. Being a public utility service provider, it will need more Fixed capital c. Give one example of public utility service that you come across on day-to-day basis. Ans. B.E.S.T is an example of public utility service. (2) A company is planning to enhance it’s production capacity and is evaluating the possibility of purchasing new machinery whose cost is ` 2 crore or has alternative of machinery available on lease basis. a. What type of asset is machinery ? Ans. Machinery is a fixed asset since it is used for longer period of time. b. Capital used for purchase of machinery is fixed capital or working capital ? Ans. The capital used for purchase of machinery is fixed capital. c. Does the size of a business determine the fixed capital requirement ? Ans. Yes, the size of a business determine the fixed capital requirement. CHAPTER 2 (1) The Balance-sheet of a Donald Company for the year 2018-19 reveals equity share capital of Rs. 25,00,000 and retained earnings of Rs. 50,00,000. a) Is the company financially sound ? Ans. Yes, the company is financially sound. b) Can the retained earnings be converted into capital ? Ans. Yes the retained earnings can be converted into share capital by issuing bonus shares if the company is financially sound. b) What type of source retained earning is ? Ans. Retained earning is Internal source of finance. (2) Mr. Satish is a speculator. He desires to take advantage of growing market for company's product and earn handsomely. a) According to you which type of share Mr. Satish will choose to invest ? Ans. According to me, Mr Satish will choose to invest in equity shares. b) What does he receive as return on investment ? Ans. He may receive Dividend as a return on investment. c) State any one right which he will enjoy as a shareholder. Ans. He may enjoy right to vote as a shareholder and thus participate in the management of the company. (3) Mr. Rohit, an individual investor, invests his own funds in the securities. He depends on investment income and does not want to take any risk. He is interested in definite rate of income and safety of principal. a) Name the type of security that Mr. Rohit will opt for. Ans. Mr. Rohit will opt for either Preference shares. b) What does he receive as return on his investment ? Ans. He shall receive dividend as a return on his investment. c) The return on investment which he receives is fixed or fluctuating ? Ans. The return on investment which he receives is fixed. Chapter 3 1. Eva Ltd. Company’s capital structure is made up of 1,00,000 Equity shares having face value of ` 10 each. The company has offered to the public 40,000 Equity shares and out of this, the public has subscribed for 30,000 Equity shares. State the following in `. a) Authorised capital Ans. The Authorised capital is 10,00,000 (1,00,000 equity shares x10 face value of a share) b) Subscribed capital Ans. Subscribed capital is 3,00,000 as 30,000 equity shares were subscribed by public. c) Issued capital Ans. Issued capital is 4,00,000 as 40,000 equity shares were issued for public subscription. 2. TRI Ltd. Company is newly incorporated public company and wants to raise capital by selling Equity shares to the public. The Board of Directors are considering various options for this. Advise the Board on the following matters : a) What should the company offer - IPO or FPO ? Ans. The company should offer IPO as it is a newly incorporated company. b) Can the company offer Bonus Shares to raise its capital ? Ans. No, the company cannot offer Bonus shares. c) Can the company enter into Underwriting Agreement ? Ans. Yes, the company can enter into an Underwriting Agreement so that Unsubscribed shares can be taken up to raise its Minimum subscription. 3. Silver Ltd. Company has recently come out with its public offer through FPO. Their issue was over subscribed. The Board of Directors now wants to start the allotment process. Please advise the Board on : a) Should the company set up allotment committee ? Ans. Yes, the company should set up an Allotment Committee. b) How should the company inform the applicants to whom the company is allotting shares ? Ans. The company should inform the applicants to whom the company is allotting shares by sending them Allotment Letter. c) Within what period should the company issue share certificate ? Ans. The company should issue the share certificate within two months from the date of allotment of shares. 4. Red Tubes Ltd. has made a demand on its shareholders to pay the balance unpaid amount of 20/- per share (having a face value of ` 100) held by them. The company has sent letters asking the shareholders to pay the money to its Bankers within the specified time. a) Are the shareholders liable to pay Rs. 20 for the shares held by them ? Ans. Yes, the shareholders are liable to pay Rs. 20 for the shares held by them. b) Name the letter sent by the company to its shareholders asking them to pay Rs. 20/- Ans. The company sends Call letter to shareholders asking them to pay call money. c) What happens if a shareholder fails to pay the money within the specified time ? Ans. If a shareholder fails to pay the money within the specified time, then the company sends a warning letter and after that the company can forfeit such shares. 5. X owns 100 shares while Y owns 500 shares of Red Tubes Ltd. The company has asked all its shareholders to pay the balance unpaid amount of ` 20. X pays the full money demanded by the company. Y, who is in a bad financial position is unable to pay any money. a) Can the company forfeit the shares of Y ? Ans. Yes, the company can forfeit the shares of Y. b) Can the company forfeit the shares of X ? ans. No, the company cannot forfeit the shares of X. c) Can X transfer his shares ? Ans. Yes, X can transfer his shares. Chapter 4 1. Rose limited company proposes to issue debenture to the public to raise funds. After discussions, the Board of directors have decided to issue secured, Redeemable non-convertible debentures with a tenure of Ten years. Please advise the board on following matters : a. Should the company appoint Debenture trustee ? Ans. Yes, the company should appoint Debenture trustee. b. Should the company create a charge on its assets ? Ans. Yes, the company should create a charge on its tangible assets. c. Can the tenure of debentures be less than ten years ? Ans. The tenure of Secured debentures is maximum ten years, but less than ten years is possible as it demonstrates a company’s strong liquidity position. 2. DDS financial plans to raise ` 10 crores by issuing secured, Non-convertible debentures. However, as per the Articles of Association, the Board of Directors has authority only to raise upto 5 crores. They are also considering whether to go for private placement or make public offer. Please advise them on the following: a. What can be the maximum tenure of the debentures to be issued ? Ans. The maximum tenure of the debentures to be issued can be 10 years. b. Is the proposed issue within the borrowing powers of the board ? Ans. No, the proposed issue is not within the borrowing powers of the board. c. Within what period should company issue Debenture certificate ? Ans. The company should issue Debenture certificate within 6 months of the allotment of debenture. Chapter 5 1. Apple Company Ltd. plans to raise funds through Public Deposits. It’s net worth is 10 Crores. a. Can they accept deposits from the public ? Ans. No they cannot accept deposits from the public as the net worth is less than 100 crores. b. Can they accept deposits which matures after 4 years. Ans. No they cannot accept deposits which matures after 4 years as the maximum period of deposit cannot exceed 36 months. c. Within what period should the company issue deposit Receipt to it’s depositors ? Ans. The company should issue deposit Receipt to its depositors within 21 days from the date of receipt of money. 2. ABC Company Ltd. is an eligible Public Company as per the Companies Act, 2013 with reference to accepting Public Deposits. a. Can the company accept deposits in joint names ? Ans. Yes, the company can accept deposits in joint names but not more than 3 names. b. Can the company accept deposits from it’s members ? Ans. Yes, the company can accept deposits from its members as it is an Eligible Public company. c. Can the company issue secured deposits ? 3. Apple Company Ltd. is an eligible Public Company. It plans to raise secured deposits from the public. Please advice its Board on the following. a. Does the company need to get shareholders approval for accepting deposits ? Ans. Yes, the company needs to get shareholders approval for accepting deposits. b. Does the company have to appoint a Debenture Trustee ? Ans. Yes, the company have to appoint a debenture trustee. c. Within what period should the company create a charge on it’s assets ? Ans. The company should create a charge on its tangible assets within 30 days of acceptance. 4. SUN Pvt. Ltd. company wants to raise funds through deposits. a. Can the company accept deposits from the public ? Ans. No the company cannot accept deposits from the public as it is a Private company. b. Which document should the company issue to invite deposits ? Ans. The company should issue circular to its members to invite deposits. c. What is the maximum period for which they can accept deposits ? Ans. The maximum period of deposits which they can accept is 36 months. Chapter 9 1. Mr. Z holds 100 shares of Peculiar Co. Ltd. in Physical mode and wishes to convert the same in electronic mode : a) Mr. Z holds a Saving Bank Account with CFDH Bank Ltd. Can he deposit his shares in this account for demat ? Ans. No, Mr. Z cannot deposit his shares in this account for demat. b) What type of account is needed for the same ? Ans. For this a demat account is required to convert the shares in electronic mode. c) Is it the RBI which will be the custodian of shares of Mr. Z after demating ? Ans. No, RBI will not be the custodian of Shares, Depository (NSDL or CDSL)will be the custodian. 2. Mr. R holds 100 shares of Peculiar Co. Ltd. in Demat mode : a) He wants to transfer one share each to his wife, daughter and son. Can he do so ? Ans. He can transfer one share each to his wife, daughter and son if they too have demat account. b) Does he need to submit DRF or DIS if he wants to transfer his shares ? Ans. He already has Demat account, so he need to submit DIS if he wants to transfer his shares. c) Can he nominate his wife in his demat account ? Ans. Yes, every BO has a right to nominate, so he can nominate his wife in his demat account. Chapter 10 1. LMN Co Limited decides to declare dividend for the financial year 2018-19 in which it has earned profits less than their expectations. a) Is Board right in recommending a dividend of Rs. 5/- per share out of free reserves ? Ans. Yes, the Board is right in recommending a dividend of Rs. 5/ per share out of free reserves as Companies are allowed to pay final dividend out of their free reserves. b) Can Board declare the dividend though it is not approved by AGM ? Ans. No the Board cannot declare the dividend unless it is approved by AGM. c) Can the Board give dividend in the form of gifts ? Ans. No the Board cannot give dividend in the form of gifts as Dividend can be paid only in cash and not in kind. 2. ABC Co. Ltd. decides to pay Interim Dividend a) Can it be paid out of free reserves ? Ans. No, it cannot be paid out of free reserves as Interim dividend can be declared only out of profits of current accounting year. b) Is the Board right in declaring the same at the Board Meeting ? Ans. Yes the board has the power to decide and declare the same at the Board Meeting. c) Can the company distribute the same within 30 days of its declaration ? Ans. Yes, the company must distribute the same within 30 days of its declaration. 3. RAJ Company limited decides to pay Interim Dividend a) Is the Board justified to decide Interim Dividend of Rs. 5/per share even though profits till date are insufficient ? Ans. No the board is not justified to decide Interim dividend even though profits are insufficient as Interim dividend is paid out of profits of current accounting year only. b) Can the Board declare it out of Free Reserves ? Ans. No, the Board cannot declare it out of free Reserves. c) Can the Board declare it out of Capital ? Ans.No, the board cannot declare it out of capital. 4. DIAMOND Co. Ltd. is considering to declare Interim Dividend. a) In how many days of declaration it should transfer the funds to Dividend Account ? Ans. The funds should be transferred to Dividend account within 5 days of the declaration of Interim dividend. b) In how many days it must pay it to shareholders? Ans. The Interim dividend must be paid to it shareholders within 30 days of the declaration. c) In how many days of declaration it must transfer the funds to the Unpaid Dividend A/c? Ans. It must transfer the funds to the Unpaid Dividend A/c within 37 days from its declaration. 5. The Board of Directors of STAR Co. Ltd. which is a listed company recommends a dividend of Rs. 15/- per share to be paid in cash. a) Is it justified to pay the dividend firstly to its Preference Shareholders and then after to Equity Shareholders? Ans. Yes, it is justified to pay the dividend firstly to Preference shareholders and then to equity shareholders as preference shareholders gets a preference in payment of dividend. b) Is the AGM required to approve the same? Ans. Yes, the AGM is required to approve the same. c) Can the company pay dividend in cash? Ans. Yes, dividend payable in cash shall be paid by cheque or warrant or by electronic mode to the entitled shareholders. 6. GOLD Co. Ltd. declares a dividend of ` 10/- per share for F.Y. 2018-19. a) Is company under default, if dividend was not paid within 30 days of its declaration ? Ans. Yes, the company is under default if dividend was not paid within 30 days of its declaration. b) Is company right in transferring the unpaid dividend to its Debenture Reserve Account ? Ans. No, the company is not right in transferring the unpaid dividend to its Debenture Reserve Account, it shall be transferred to Unpaid Dividend Account. c) Does the company have to transfer the amount of unpaid dividend to IEPF after 30 days ? Ans. No, the company have to transfer the amount of unpaid dividend to IEPF after 7 years. Chapter 11 (1) Joy ltd. Company is a newly incorporated company. It wants to raise capital for the first time by issuing equity shares. a. Should it go to primary market or secondary market to issue its shares ? Ans. It should go to Primary market to issue its shares as it is a newly incorporated company. b. Should it offer its shares through public offer or rights issue ? Ans. It should offer its shares through public offer. Rights issue can be offered to existing shareholders only. c. What will be the issue of Equity shares by Joy Ltd.Co. called as, IPO or FPO ? Ans. As it is the First issue of the company, it will be called as IPO (2) Mr. X is the CFO ( Chief Financial Officer ) of PQR Co. Ltd. which is a reputed company in the field of construction business. Often Mr. X has to decide on investing surplus funds of the company for short durations. And at times, he also has to decide the sources from where he can raise funds for short durations. a. Assume on behalf of the company Mr. X has Rs. 5 lakhs and wants to invest for a short period. Should he buy Equity shares or Certificate of Deposit ? Ans. He should buy Certificate of Deposit which comes in multiplies of lakhs and with a maturity of minimum 7 days to maximum 1 year b. The company has surplus funds and wants to invest it. However, he needs the moneyback in 4 months, so should he invest in Treasury Bills or Government Securities ? Ans. Mr. X should invest surplus funds in government securities as these securities are safe investments. c. Can the company issue Certificate of Deposit ? Ans. No the company cannot issue Certificate of deposit as CDs are unsecured negotiable instrument usually issued by commercial banks and financial institutions. Chapter 12 1) Mr. Y is a practising Co. Secretary offering advisory services to companies, institutions, etc. on corporate laws including companies Act. He has received few queries from his clients, please assist Mr. Y in answering them. a) BDl bank wants to offer DP services. Whom should they approach for registering as DP ? Ans.BDI bank should approach SEBI for registering as DP. b) KM Financial wants to offer Debenture Trustee services. Where should they apply for getting registered ? Ans. KM Financial should apply to SEBI for getting registered. c) TT Ltd. Co. wants to issue an IPO. Should it get itself registered with SEBI ? Ans. Yes TT Ltd. Co should be registered with SEBI as it wants to issue an IPO. 2) Mr. P has a recently got his B.Sc. degree. He has enrolled for a course in securities market. As a new student of this subject, he has few queries as follows : a) Does a Company need to be listed on a stock exchange to sell its securities through the stock exchange. Ans. Yes, a Company need to be listed on a stock exchange to sell its securities through the stock exchange b) What is the term used for referring to a stock exchange’s ability to reflect the economic conditions of a country ? Ans. Economic Mirror is the term used for referring to a stock exchange’s ability to reflect the economic conditions of a country c) What is the term which refers to the functions of stock exchange as a provider of ready market for sale and purchase of security ? Ans.Liquidity is the term which refers to the functions of stock exchange as a provider of ready market for sale and purchase of security All the Best Kiddos……..