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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. In the above case, which of the following sources of finance is most suitable?
- a)Shares
- b)Debentures
- c)Retained earnings
- d)Bank loans
Correct answer is option 'C'. Can you explain this answer?
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Direction: Read the following text and answer the questions on the ba...
Retained earnings (RE) is the amount of net income left over for the business after it has paid out dividends to its shareholders. The decision to retain the earnings or distribute them among the shareholders is usually left to the company management.
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Direction: Read the following text and answer the questions on the ba...
Source of Finance for Faulad Steel Ltd.
Introduction:
Faulad Steel Ltd. is a multi-product company that manufactures steel pipes for various applications. Recently, the company received a large order from a multinational corporation (MNC) which requires additional funds. However, the finance manager reported that the company is unable to bear the extra burden of explicit cost and the equity shareholders are against the issuance of more shares as it may affect their control consideration. In such a situation, the company's only option is to rely on retained earnings.
Explanation:
1. Shares:
- Shares represent ownership in a company and can be issued to raise capital.
- However, the equity shareholders of Faulad Steel Ltd. insist not to issue more shares as it can affect their control consideration.
- Therefore, issuing more shares is not a suitable option in this case.
2. Debentures:
- Debentures are long-term debt instruments issued by a company to raise funds.
- While debentures can be a suitable source of finance, they may not be the most suitable option for Faulad Steel Ltd. in this case.
- The finance manager reported that the company is not in a position to bear the extra burden of explicit cost, which suggests that taking on more debt through debentures may not be feasible.
3. Retained Earnings:
- Retained earnings are the accumulated profits of a company that are retained for reinvestment in the business.
- In this case, the company has only one option, which is ploughing back its profit or utilizing its retained earnings.
- Retained earnings are a suitable source of finance for Faulad Steel Ltd. as it allows the company to use its own internal funds without incurring additional debt or diluting equity ownership.
- By utilizing retained earnings, the company can finance the big order from the MNC without relying on external sources of finance.
4. Bank Loans:
- Bank loans are a common source of finance for companies, where funds are borrowed from banks and repaid over a specific period of time.
- However, in this case, the finance manager reported that the company is not in a position to bear the extra burden of explicit cost, suggesting that taking on more debt through bank loans may not be feasible.
Conclusion:
In the given case, the most suitable source of finance for Faulad Steel Ltd. is retained earnings. By utilizing its accumulated profits, the company can finance the big order from the MNC without incurring additional debt or diluting equity ownership. This option allows the company to rely on its internal funds and avoid the potential drawbacks associated with issuing more shares or taking on additional debt.
Introduction:
Faulad Steel Ltd. is a multi-product company that manufactures steel pipes for various applications. Recently, the company received a large order from a multinational corporation (MNC) which requires additional funds. However, the finance manager reported that the company is unable to bear the extra burden of explicit cost and the equity shareholders are against the issuance of more shares as it may affect their control consideration. In such a situation, the company's only option is to rely on retained earnings.
Explanation:
1. Shares:
- Shares represent ownership in a company and can be issued to raise capital.
- However, the equity shareholders of Faulad Steel Ltd. insist not to issue more shares as it can affect their control consideration.
- Therefore, issuing more shares is not a suitable option in this case.
2. Debentures:
- Debentures are long-term debt instruments issued by a company to raise funds.
- While debentures can be a suitable source of finance, they may not be the most suitable option for Faulad Steel Ltd. in this case.
- The finance manager reported that the company is not in a position to bear the extra burden of explicit cost, which suggests that taking on more debt through debentures may not be feasible.
3. Retained Earnings:
- Retained earnings are the accumulated profits of a company that are retained for reinvestment in the business.
- In this case, the company has only one option, which is ploughing back its profit or utilizing its retained earnings.
- Retained earnings are a suitable source of finance for Faulad Steel Ltd. as it allows the company to use its own internal funds without incurring additional debt or diluting equity ownership.
- By utilizing retained earnings, the company can finance the big order from the MNC without relying on external sources of finance.
4. Bank Loans:
- Bank loans are a common source of finance for companies, where funds are borrowed from banks and repaid over a specific period of time.
- However, in this case, the finance manager reported that the company is not in a position to bear the extra burden of explicit cost, suggesting that taking on more debt through bank loans may not be feasible.
Conclusion:
In the given case, the most suitable source of finance for Faulad Steel Ltd. is retained earnings. By utilizing its accumulated profits, the company can finance the big order from the MNC without incurring additional debt or diluting equity ownership. This option allows the company to rely on its internal funds and avoid the potential drawbacks associated with issuing more shares or taking on additional debt.
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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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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Here you can find the meaning of 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. Can you explain this answer?, a detailed solution 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice 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. In the above case, which of the following sources of finance is most suitable?a)Sharesb)Debenturesc)Retained earningsd)Bank loansCorrect answer is option 'C'. Can you explain this answer? tests, examples and also practice Commerce tests.
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