CA Foundation Exam > CA Foundation Questions > A partnership firm can raise its capital:a)By...
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A partnership firm can raise its capital:
- a)By the issue of Cumulative preference shares
- b)By the issue of participating preference shares
- c)By the issue of Non-convertible preference shares
- d)None of the above.
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
A partnership firm can raise its capital:a)By the issue of Cumulative ...
A firm can rise capital by issue equity shares because equity shares are called own capital of firm
Community Answer
A partnership firm can raise its capital:a)By the issue of Cumulative ...
Explanation:
Definition of a Partnership Firm:
A partnership firm is a form of business organization where two or more individuals come together to carry on a business with the aim of making a profit. In a partnership, the partners share the profits, losses, and liabilities of the business.
Raising Capital in a Partnership Firm:
Raising capital refers to the process of obtaining funds to finance the operations and expansion of a business. Partnership firms have various options to raise capital, including:
1. Contribution of Capital by Partners:
Partnership firms can raise capital by the contribution of capital by the partners. Each partner contributes a certain amount of capital to the firm, which becomes the initial capital of the business.
2. Retained Earnings:
Partnership firms can also raise capital by retaining a portion of their profits in the business. These retained earnings can be used for future investments, expansion, or other capital requirements.
3. Borrowing from Banks and Financial Institutions:
Partnership firms can raise capital by borrowing funds from banks and financial institutions. This can be done by availing loans, overdraft facilities, or other forms of credit.
4. Bringing in New Partners:
Partnership firms can raise capital by admitting new partners into the business. The new partners contribute capital to the firm in exchange for a share in the profits and losses.
5. Convertible Preference Shares:
Contrary to the statement in the question, a partnership firm can raise capital by the issue of convertible preference shares. Convertible preference shares are a type of preference shares that can be converted into equity shares after a certain period of time or under certain conditions. By issuing convertible preference shares, a partnership firm can raise capital from investors who are willing to convert their preference shares into equity shares in the future.
Conclusion:
In conclusion, a partnership firm can raise its capital through various means such as partner contributions, retained earnings, borrowing from banks, bringing in new partners, and even by issuing convertible preference shares. The correct answer to the given question is not option 'D' but rather option 'E' as none of the options provided in the question accurately reflect the ways in which a partnership firm can raise its capital.
Definition of a Partnership Firm:
A partnership firm is a form of business organization where two or more individuals come together to carry on a business with the aim of making a profit. In a partnership, the partners share the profits, losses, and liabilities of the business.
Raising Capital in a Partnership Firm:
Raising capital refers to the process of obtaining funds to finance the operations and expansion of a business. Partnership firms have various options to raise capital, including:
1. Contribution of Capital by Partners:
Partnership firms can raise capital by the contribution of capital by the partners. Each partner contributes a certain amount of capital to the firm, which becomes the initial capital of the business.
2. Retained Earnings:
Partnership firms can also raise capital by retaining a portion of their profits in the business. These retained earnings can be used for future investments, expansion, or other capital requirements.
3. Borrowing from Banks and Financial Institutions:
Partnership firms can raise capital by borrowing funds from banks and financial institutions. This can be done by availing loans, overdraft facilities, or other forms of credit.
4. Bringing in New Partners:
Partnership firms can raise capital by admitting new partners into the business. The new partners contribute capital to the firm in exchange for a share in the profits and losses.
5. Convertible Preference Shares:
Contrary to the statement in the question, a partnership firm can raise capital by the issue of convertible preference shares. Convertible preference shares are a type of preference shares that can be converted into equity shares after a certain period of time or under certain conditions. By issuing convertible preference shares, a partnership firm can raise capital from investors who are willing to convert their preference shares into equity shares in the future.
Conclusion:
In conclusion, a partnership firm can raise its capital through various means such as partner contributions, retained earnings, borrowing from banks, bringing in new partners, and even by issuing convertible preference shares. The correct answer to the given question is not option 'D' but rather option 'E' as none of the options provided in the question accurately reflect the ways in which a partnership firm can raise its capital.
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A partnership firm can raise its capital:a)By the issue of Cumulative preference sharesb)By the issue of participating preference sharesc)By the issue of Non-convertible preference sharesd)None of the above.Correct answer is option 'D'. Can you explain this answer?
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