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Business Studies

Merits and Demerits of Equity Capital

Do equity sha...

Question

Do equity shares provide creditworthiness to the company and confidence to prospective loan providers?

A

True

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B

False

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Solution

The correct option is B
False

Equity shares neither provide creditworthiness to the company nor confidence to prospective loan providers.

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Q. As per Rule 20 of the Companies (Management and Administration) Amendment Rules, 2014, every company which has listed its equity shares on a recognized stock exchange and every company having not less than ________ shall provide to its members facility to exercise their right to vote on resolutions proposed to be considered at a general meeting by electronic means.

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Q. ' Rakesh Steel Lts.' is a large and creditworthy company manufacturing steel for the Indian market. It now wants to cater to the Asian market and decides to invest in new hi-tech machines. Since the investment is large, it requires long term finance. It decides to raise funds by issuing equity shares. the issue of equity shares involves huge flotation cost. To meet the expenses of flotation cost the company decides to tap the money market.

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