Question:
Differentiate between a share and a debenture.
Answer:
Following are the main differences between a debenture and a share:
- Debenture holder is a creditor of the company and cannot take part in the management of the company while a shareholder is the owner of the company. It is the basic distinction between a debenture and a share.
- Debenture holders will get interest on debentures and will be paid in all circumstances, whether there is profit or loss will not affect the payment of interest on debentures. Shareholder will get a portion of the profits called dividend which is dependent on the profits of the company. It can be declared by the directors of the company out of profits only.
- Shares cannot be converted into debentures whereas debentures can be converted into shares.
- Debentures will get priority in getting the money back as compared to shareholder in case of liquidation of a company.
- There are no restrictions on the issue of debentures at a discount, whereas shares at discount can be issued only after observing certain legal formalities.
- Convertible debentures which can be converted into shares at the option of debenture holder can be issued whereas shares convertible into debentures cannot be issued.
- There can be mortgage debentures i.e. assets of the company can be mortgaged in favor of debenture holders. But there can be no mortgage shares. Assets of the company cannot be mortgaged in favor of shareholders.
Sources of Business Finance
Q 1.
Write a note on international sources of finance.
Q 2.
In leasing agreement what right is given to lessee?
Q 3.
Differentiate between a share and a debenture.
Q 4.
Give the full form of GDR and ADR.
Q 6.
Explain in detail the types of debenture a company can issue.
Q 7.
What is a commercial paper? What are its advantages and limitations?
Q 8.
Name two sources of funds under owner's fund.
Q 9.
Which deposits are directly raised from the public?
Q 10.
Explain trade credit and bank credit as sources of short term finance for business enterprises.
Q 11.
State two factors affecting the working capital requirement of a firm.
Q 12.
What advantage does issue of debentures provide over the issue of equity shares?
Q 13.
Why does business enterprise need finance?
Q 14.
What do you mean by discounting of bills of exchange?
Q 15.
Specify the objective of I.D.B.I.
Q 16.
Preference shares are preferred by company but not by investors. Why?
Q 17.
What is business finance? Why do businesses need funds? Explain.
Q 18.
Who regulates the acceptance of public deposits?
Q 19.
What is factoring? Discuss its pros and cons.
Q 20.
State the meaning of finance. What factors determine working capital and fixed capital requirements of a business?
Q 21.
Name any three special financial institutions and state their objectives.
Q 22.
What are Indian depository receipts (IDRs)?
Q 23.
What is lease financing? Discuss its merits and demerits.
Q 24.
Discuss the financial instruments used in international financing.
Q 25.
Why preferences are given to preferential shares?
Q 26.
What are retained profits? Discuss their advantages and disadvantages.
Q 27.
State various sources of short and medium term funds.
Q 28.
Why is equity share capital called Risk Capital'?
Q 29.
Explain different types of preference shares which can be issued by a company.
Q 30.
Retained earnings are not a good source from the values point of view as it is the right of equity shareholders. Do you agree? Justify your answer.
Q 31.
What are public deposits?
Q 32.
Name zones of the Lessors and Lessees in India.
Q 33.
What is the status of debenture holders?
Q 35.
Describe in brief the features of equity shares.
Q 36.
What preferential rights are enjoyed by preference shareholders? Explain.
Q 37.
What are the two important functions of factors?
Q 38.
What is a trade credit?
Q 39.
Who are called the owners of a company?
Q 40.
State various sources of long term funds.
Q 41.
What is the difference between GDR and ADR? Explain.
Q 42.
State two factors affecting the fixed capital requirement of a firm.
Q 43.
Mr. John has ? 1,00,000 for investment purposes. Should he invest in equity shares, preference shares, public deposits or debentures? Justify your answer.
Q 44.
List sources of raising long-term and short term finance.
Q 45.
List different types of finance.
Q 46.
Preference shares are not suitable for which kind of investors?
Q 47.
What are the preferences given to preference shareholders?
Q 48.
Classify internal and external sources on the basis of time.
Q 49.
Describe briefly the factors responsible for selecting a source of finance.
Q 50.
Debentures are good from debenture holders point of view but not for business. Do you agree? Explain.
