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Direction: Read the following text and answer the questions on the basis of the same:
Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit.
Q. ‘Company is not in a position to bear extra burden of explicit cost.’ Identify the meaning of explicit cost in the context of equity shares.
- a)Dividend
- b)Interest
- c)Market value of shares
- d)Operating expenses
Correct answer is option 'A'. Can you explain this answer?
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Direction: Read the following text and answer the questions on the ba...
Explicit costs are typical business costs which appear in the general ledger and have a direct impact on the profitability of a company. Examples of explicit costs include salaries, raw materials, utilities, lease payments, and other direct costs.
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Direction: Read the following text and answer the questions on the ba...
Explicit Cost in the context of equity shares:
Explicit cost refers to the actual expenses or costs that a company incurs in order to generate revenue or achieve its objectives. In the context of equity shares, explicit cost can be understood as the financial obligations or payments that a company has to make to its equity shareholders.
Equity shareholders are the owners of a company and they provide the necessary capital in exchange for ownership in the company. They have certain rights and expectations, including the expectation of receiving a return on their investment in the form of dividends.
Explanation:
In the given scenario, the finance manager of Faulad Steel Ltd. reported that the company is not in a position to bear the extra burden of explicit cost. This implies that the company is unable to afford the additional financial obligations or payments that would arise from issuing more equity shares.
The specific meaning of explicit cost in this context is identified as dividends. Dividends are the payments made by a company to its equity shareholders as a share of the company's profits. Issuing more shares would mean that the company would have to distribute a larger portion of its profits as dividends, which would increase its explicit cost.
Reasoning:
The reason behind the company's inability to bear the extra burden of explicit cost is twofold:
1. Financial constraints: The company is facing financial constraints and does not have sufficient funds to meet the additional dividend payments that would be required if more equity shares are issued. This implies that the company's current financial position is not strong enough to support the increased explicit cost.
2. Shareholder control: Equity shareholders, who are the owners of the company, have expressed their reluctance to issue more shares. This is because issuing more shares would dilute their ownership and control over the company. They are concerned that issuing more shares would reduce their proportionate ownership and influence in decision-making. Therefore, they insist on retaining their control consideration and are against the issuance of more shares.
Conclusion:
In the given context, the meaning of explicit cost in relation to equity shares is identified as dividends. The finance manager of Faulad Steel Ltd. reported that the company is not in a position to bear the extra burden of explicit cost, which implies that the company is unable to afford the additional dividend payments that would be required if more equity shares are issued. This is due to financial constraints and the insistence of equity shareholders to retain their control consideration.
Explicit cost refers to the actual expenses or costs that a company incurs in order to generate revenue or achieve its objectives. In the context of equity shares, explicit cost can be understood as the financial obligations or payments that a company has to make to its equity shareholders.
Equity shareholders are the owners of a company and they provide the necessary capital in exchange for ownership in the company. They have certain rights and expectations, including the expectation of receiving a return on their investment in the form of dividends.
Explanation:
In the given scenario, the finance manager of Faulad Steel Ltd. reported that the company is not in a position to bear the extra burden of explicit cost. This implies that the company is unable to afford the additional financial obligations or payments that would arise from issuing more equity shares.
The specific meaning of explicit cost in this context is identified as dividends. Dividends are the payments made by a company to its equity shareholders as a share of the company's profits. Issuing more shares would mean that the company would have to distribute a larger portion of its profits as dividends, which would increase its explicit cost.
Reasoning:
The reason behind the company's inability to bear the extra burden of explicit cost is twofold:
1. Financial constraints: The company is facing financial constraints and does not have sufficient funds to meet the additional dividend payments that would be required if more equity shares are issued. This implies that the company's current financial position is not strong enough to support the increased explicit cost.
2. Shareholder control: Equity shareholders, who are the owners of the company, have expressed their reluctance to issue more shares. This is because issuing more shares would dilute their ownership and control over the company. They are concerned that issuing more shares would reduce their proportionate ownership and influence in decision-making. Therefore, they insist on retaining their control consideration and are against the issuance of more shares.
Conclusion:
In the given context, the meaning of explicit cost in relation to equity shares is identified as dividends. The finance manager of Faulad Steel Ltd. reported that the company is not in a position to bear the extra burden of explicit cost, which implies that the company is unable to afford the additional dividend payments that would be required if more equity shares are issued. This is due to financial constraints and the insistence of equity shareholders to retain their control consideration.
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Direction: Read the following text and answer the questions on the basis of the same:Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit.Q. ‘Company is not in a position to bear extra burden of explicit cost.’ Identify the meaning of explicit cost in the context of equity shares.a)Dividendb)Interestc)Market value of sharesd)Operating expensesCorrect answer is option 'A'. Can you explain this answer?
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Direction: Read the following text and answer the questions on the basis of the same:Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit.Q. ‘Company is not in a position to bear extra burden of explicit cost.’ Identify the meaning of explicit cost in the context of equity shares.a)Dividendb)Interestc)Market value of sharesd)Operating expensesCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Direction: Read the following text and answer the questions on the basis of the same:Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit.Q. ‘Company is not in a position to bear extra burden of explicit cost.’ Identify the meaning of explicit cost in the context of equity shares.a)Dividendb)Interestc)Market value of sharesd)Operating expensesCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Direction: Read the following text and answer the questions on the basis of the same:Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit.Q. ‘Company is not in a position to bear extra burden of explicit cost.’ Identify the meaning of explicit cost in the context of equity shares.a)Dividendb)Interestc)Market value of sharesd)Operating expensesCorrect answer is option 'A'. Can you explain this answer?.
Direction: Read the following text and answer the questions on the basis of the same:Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit.Q. ‘Company is not in a position to bear extra burden of explicit cost.’ Identify the meaning of explicit cost in the context of equity shares.a)Dividendb)Interestc)Market value of sharesd)Operating expensesCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Direction: Read the following text and answer the questions on the basis of the same:Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit.Q. ‘Company is not in a position to bear extra burden of explicit cost.’ Identify the meaning of explicit cost in the context of equity shares.a)Dividendb)Interestc)Market value of sharesd)Operating expensesCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Direction: Read the following text and answer the questions on the basis of the same:Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit.Q. ‘Company is not in a position to bear extra burden of explicit cost.’ Identify the meaning of explicit cost in the context of equity shares.a)Dividendb)Interestc)Market value of sharesd)Operating expensesCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Direction: Read the following text and answer the questions on the basis of the same:Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit.Q. ‘Company is not in a position to bear extra burden of explicit cost.’ Identify the meaning of explicit cost in the context of equity shares.a)Dividendb)Interestc)Market value of sharesd)Operating expensesCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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