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Business Studies

Capital Structure

Act of sellin...

Question

Act of selling a part or the whole of shares of selected public sector undertakings (PSU) held by the government to generate capital receipts is called _______.

A

investment

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B

disinvestment

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C

savings

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D

none of the above

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Solution

The correct option is A disinvestment
Act of selling a part or the whole of shares of selected public sector undertakings (PSU) held by the government to generate capital receipts is called disinvestment.
It is also referred to as 'divestment' or 'divestiture.' In most contexts it refers to government selling partly or fully government owned enterprise.

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Similar questions

Categorise the following government receipts into revenue and capital receipts. Give reasons for your answer.

(i) Receipt from sale of shares of a public sector undertaking.

(ii) Borrowing from public.

(iii) Profit of public sector undertakings.

(iv) Income tax received by government.

Q. Identify the following as revenue receipts and capital receipts. Give reasons.
(i) Loans recovered from Public sector enterprises.
(ii) License and court fees received by the Government in the year 2014-15.
(iii) Loan taken from USA for the infrastructural developments.
(iv) Sale of shares held by Government in a PSU.
(v) Financial help from Microsoft for the victims of flood affected areas.
(vi) Amount borrowed from Japan for construction of Metro.
(vii) Dividend received by Government from a company.
(viii) Funds raised from public in the form of National Saving Certificates.
(ix) Sale of 40% shares of a public sector undertaking to a private enterprise.
(x) Profits of LIC, a public enterprise.

Q. Short answer type questions:
Giving reasons, categorise the following into revenue receipts and capital receipts: (i) Recovery of loans; (ii) Corporation tax; (Ili) Dividends on investments made by government; (iv) Sale of a public sector undertaking.

Q. Privatization of the public sector undertakings by selling off part of the equity of Public Sector Unions to the public is known as ______________.

Q. Statement : The government has decided to disinvest large chunk of its equity in select public sector undertakings for a better fiscal management.
Assumptions:
I. The amount generated out of the disinvestment process may reduce substantially the mounting fiscal deficits.
II. There will be enough demand in the market for the shares of these undertakings.

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