Page 35 - DMGT409Basic Financial Management

Basic Financial Management

Notes Preference Share: Preference share capital gives certain privileges to its holders on the equity
shareholders.
Retained Earnings: These are the portion of earnings available to equity shareholders, which are
ploughed back in the company.

Trade Credit: It refers to the credit extended by the supplier of goods or services to his/her
customer in the normal course of business.

2.6 Self Assessment

Fill in the blanks:
1. Trade credit is a ......................... source of short-term fi nance.

2. ......................... income is income received in advance by the firm for supply of goods in

future.
3. CPs are sold at ......................... and redeemed at ......................... .

4. A firm cannot issue public deposits for more than ......................... of its share capital and
free reserves.
5. ......................... interest rate ceiling on public deposits.
6. ......................... is the smallest unit into which the total capital of the company is divided.

7. As preference share capital lies between debenture capital and equity share capital with
regards to claim on assets and income of the company hence, it is called as ........................ .
8. ........................ facility is an agreement between the borrower and the banker, where the
borrower is allowed to withdraw funds in excess of the balance in his/her current accounts
up to a certain limit during a specifi ed period.

9. Treasury bills were first issued by the Indian government in ........................ .

State whether the following statements are true or false:
10. Minimum size of CP is ` 6 lakhs.
11. Public deposits are governed by the Companies (Acceptance of Deposits) Amendment
Rules 1978.
12. There are three types of inter-corporate deposits.
13. A share is a small unit of capital of a company.

14. Preference share capital gives certain privileges to its holders on the equity shareholders.
15. Participatory preference share holders have the right to participate in company meetings.

16. Bonds are issued for short-term Finance

2.7 Review Questions

1. “Is Trade Credit a source of finance”. Discuss.

2. “Accruals are free source of fi nance”, comment.
3. Write a brief note on CP as a source of fi nance.

4. What is public deposit? Discuss its advantages and disadvantages.

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