LOVELY PUBLIC SR SEC SCHOOL
ASSIGNMENT Ch-7 Sources of finance
SUBJECT :BUSINESS STUDIES
1.After completing the studies Payal decided to start her own business of handmade chocolates chocolates. After analysing all the merits and demerits she came to a conclusion that total funds required are rupees 15 lakh. She had rupees 300000 in her savings bank account. As these funds were insufficient to start the business she approached HDFC Bank for obtaining a loan of rupees 12 lakh. The loan was approved within a month. In the context of the above answer the following:
a) Categorise the two types of funds on the basis of ownership.
b)Out of 2 sources of funds which one is a permanent source of finance.
c) which source of funds required legal obligation to pay interest at a fixed rate at regular intervals question mark.
2. After reading an email about the upcoming public issue of preference shares off National solar power company e Rajiv made up his mind to invest money in this issue. He discuss to invest in upcoming public issue his plan with his uncle Mr Ajay who is a stockbroker. He advised Rajeev to invest in upcoming public issue of equity shares of National building corporation of India.
Give any three reasons due to which Mr Ajay wants Rajiv to invest in equity shares only.
3. Electro Steel tubes limited is a multi product company manufacturing tubes and pipes in exotic material and steel pipes in wide ranges for wide spectrum of applications. It now wants to cater to the American market and decided to invest in new hi tech machines. Since the investment is large the finance manager want to raise funds through the financial nationals only. Identify and explain the source of finance used by company to meet its funds requirement.
4. Infosys limited of reputed company in India want to tab the large amount of funds for its growth and expansion from London for long term names. It also needs money for a period of less than 3 years to meet its medium as well as short term needs. The company is following practice of educating and giving employment of underprivileged females. On the basis of the given information about Infosys limited answer the following questions.
a) Explain GDR as a source of finance used by the company to meet its requirements.
b) What is the role of European depositary in GDR?
c) What instruments will be used if an European company wants to raise funds from Indian financial market.
5.Ratan metals and tubes limited is a multi location multi product company manufacturing tubes and pipes in stainless steel invite size ranges for wide spectrum of applications applications. It now it now wants to cater to the Asian market and decided to invest in new high tech machines. Since the investment is large the finance manager want to raise funds through cheapest long term source of finance. On the basis of the given information about Ratan metals answer the following questions.
a). Identify and explain the nature source of finance to be used by company to meet its funds requirement.
b). State any four merits of the source of finance identify din part a.
6.Automatic systems limited is one of the largest suppliers off road vehicles electronic and mechanical security system. The company has a diversify product portfolio encompassing from mechanical and electronic security system and plastic interiors across the globe. The company plans to set up a new unit to manufacturers dye casting parts and high class surface finishing parts for auto durable industry
The company needs rupees 70 crores as additional capital to find its new unit. Atul the CEO of the company wanted to raise funds through issue of equity shares on the other hand the finance manager, Nimmi said that the public issue may be expensive on account of various mandatory e and non mandatory expenses. Therefore it was decided to borrow from a special financial institution. On the basis of a fore said information answer the following questions
a) Identify and explain the source of fun used bike company e to b a new unit.
b). State any two merits of raising funds through the source identified and part a
c). State any two demerits of raising funds through the specified source in part a.
7.Emami paper mills a part of Emami group specialises in the manufacture of newsprint writing and printing paper and multilayer coated board. Emami paper Mills had been successful in increasing capacity of multilayer coated board manufacturing unit at 80 Palpur in Odisha at an estimated cost of rupees 650 crores , encourage by good market response and growth in packaging sector the company is now conceptualizing another the big ticket expansion in the form of similar plant at Balasore with some similar capacity to meet the financial requirements for a period of around three years company is looking for a suitable source of finance full stop on the basis of relevant information about emami answer the following questions:
a)Specify and explain the most suitable source of finance for meeting the financial requirement of Emami mills.
b) Explain its merits and demerits of the source identified in the above case.
8. Daffodils technology limited is a software building company a technology partner to many dynamic organisations across the globe. The company ability to look beyond technologies and deliver innovative and progressive solutions has been allotted by its clients as well as the tech community worldwide. The company experiment with the latest technologies design approaches and development methodologies to build cutting edge software products. The company has issued equity and preference shares to meet its financial requirements. other sources of finance have not been considered for fund raising. This has resulted in payment of large amount of taxes to the government. the company wants to seek tax benefits and hence approaches its financial consultant for an advice.
a) why does issue of preference shares do not provide tax benefits to the company?
b) Explain two sources which will provide such benefits.
c) Explain merits & demerits of sources of funds specified in part (b)
9. Identify and explain the sources of finance highlighted in the following cases.
a)The of the source enjoy right to vote and control the company.
c)This source is not redeemed during the lifetime of the company.
d) This source is not ready facilitates the purchase of goods and services without making immediate payment.
e) In case of winding up of the company the capita is refunded after payment of debentures but before payment of equity shares.
10.Steel India Ltd. Is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7% and demand for steel is growing. It is planning to set up a new steel plant to cash on the increased demand it is facing. It is estimated that company will require about Rs 5000 crores to set up plant and about Ra 50 crores for power, fuel. On the basis of the given information answer the following questions;
a) Identify and explain the two types of capital requirements specified above by quoting the lines from the case.
b) State any two factors that affect the requirements of each of the two types of capital as identified in part a).