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Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from primary market. In the process of floating the issue, it incurred certain expenses like brokerage, commission, printing of application, advertising etc. Identify the money market instrument that can be used for financing this cost.
- a)Call money
- b)Treasury bill
- c)Commercial paper
- d)Commercial bill
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from prima...
Financing the Expenses of a Public Offer
In order to raise funds from the primary market, Anek Ltd. issued a public offer to raise Rs. 70 lakh equity. During the process of floating the issue, the company incurred various expenses such as brokerage, commission, printing of application, advertising, etc. These expenses need to be financed, and one money market instrument that can be used for this purpose is commercial paper.
Commercial Paper
Commercial paper is a short-term money market instrument issued by corporations and financial institutions to meet their short-term financing needs. It is an unsecured promissory note that typically matures in less than a year, usually within 270 days. Commercial paper is a popular instrument used by companies to raise funds quickly and at a lower cost compared to other sources of financing.
Advantages of Commercial Paper as a Financing Instrument
1. Cost-effective: Commercial paper typically offers lower interest rates compared to other sources of financing, such as bank loans. This makes it an attractive option for companies to finance their short-term expenses, including the expenses incurred during a public offer.
2. Quick access to funds: Commercial paper can be issued quickly, allowing companies to raise funds in a timely manner. This is particularly beneficial when there is an immediate need for financing, such as covering the expenses associated with a public offer.
3. Flexibility: Commercial paper can be issued in various denominations, allowing companies to tailor the instrument to their specific financing requirements. This flexibility makes it a suitable choice for financing expenses of different magnitudes.
4. Diversification of funding sources: By utilizing commercial paper to finance their expenses, companies can diversify their sources of funding. This reduces their reliance on traditional financing methods, such as bank loans, and provides them with alternative options for raising funds.
Conclusion
In the case of Anek Ltd., the expenses incurred during the process of floating the public offer can be financed using commercial paper. This money market instrument offers cost-effective and quick access to funds, making it a suitable choice for companies needing short-term financing. By utilizing commercial paper, Anek Ltd. can efficiently cover its expenses and ensure a successful public offer.
In order to raise funds from the primary market, Anek Ltd. issued a public offer to raise Rs. 70 lakh equity. During the process of floating the issue, the company incurred various expenses such as brokerage, commission, printing of application, advertising, etc. These expenses need to be financed, and one money market instrument that can be used for this purpose is commercial paper.
Commercial Paper
Commercial paper is a short-term money market instrument issued by corporations and financial institutions to meet their short-term financing needs. It is an unsecured promissory note that typically matures in less than a year, usually within 270 days. Commercial paper is a popular instrument used by companies to raise funds quickly and at a lower cost compared to other sources of financing.
Advantages of Commercial Paper as a Financing Instrument
1. Cost-effective: Commercial paper typically offers lower interest rates compared to other sources of financing, such as bank loans. This makes it an attractive option for companies to finance their short-term expenses, including the expenses incurred during a public offer.
2. Quick access to funds: Commercial paper can be issued quickly, allowing companies to raise funds in a timely manner. This is particularly beneficial when there is an immediate need for financing, such as covering the expenses associated with a public offer.
3. Flexibility: Commercial paper can be issued in various denominations, allowing companies to tailor the instrument to their specific financing requirements. This flexibility makes it a suitable choice for financing expenses of different magnitudes.
4. Diversification of funding sources: By utilizing commercial paper to finance their expenses, companies can diversify their sources of funding. This reduces their reliance on traditional financing methods, such as bank loans, and provides them with alternative options for raising funds.
Conclusion
In the case of Anek Ltd., the expenses incurred during the process of floating the public offer can be financed using commercial paper. This money market instrument offers cost-effective and quick access to funds, making it a suitable choice for companies needing short-term financing. By utilizing commercial paper, Anek Ltd. can efficiently cover its expenses and ensure a successful public offer.
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Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from prima...
Commercial paper is an unsecured form of promissory note that pays a fixed rate of interest. It is typically issued by large banks or corporations to cover short-term receivables and meet short-term financial obligations, such as funding for a new project.
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Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from primary market. In the process of floating the issue, it incurred certain expenses like brokerage, commission, printing of application, advertising etc. Identify the money market instrument that can be used for financing this cost.a)Call moneyb)Treasury billc)Commercial paperd)Commercial billCorrect answer is option 'C'. Can you explain this answer?
Question Description
Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from primary market. In the process of floating the issue, it incurred certain expenses like brokerage, commission, printing of application, advertising etc. Identify the money market instrument that can be used for financing this cost.a)Call moneyb)Treasury billc)Commercial paperd)Commercial billCorrect answer is option 'C'. Can you explain this answer? for Humanities/Arts 2025 is part of Humanities/Arts preparation. The Question and answers have been prepared according to the Humanities/Arts exam syllabus. Information about Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from primary market. In the process of floating the issue, it incurred certain expenses like brokerage, commission, printing of application, advertising etc. Identify the money market instrument that can be used for financing this cost.a)Call moneyb)Treasury billc)Commercial paperd)Commercial billCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Humanities/Arts 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from primary market. In the process of floating the issue, it incurred certain expenses like brokerage, commission, printing of application, advertising etc. Identify the money market instrument that can be used for financing this cost.a)Call moneyb)Treasury billc)Commercial paperd)Commercial billCorrect answer is option 'C'. Can you explain this answer?.
Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from primary market. In the process of floating the issue, it incurred certain expenses like brokerage, commission, printing of application, advertising etc. Identify the money market instrument that can be used for financing this cost.a)Call moneyb)Treasury billc)Commercial paperd)Commercial billCorrect answer is option 'C'. Can you explain this answer? for Humanities/Arts 2025 is part of Humanities/Arts preparation. The Question and answers have been prepared according to the Humanities/Arts exam syllabus. Information about Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from primary market. In the process of floating the issue, it incurred certain expenses like brokerage, commission, printing of application, advertising etc. Identify the money market instrument that can be used for financing this cost.a)Call moneyb)Treasury billc)Commercial paperd)Commercial billCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Humanities/Arts 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Anek Ltd. Issued a public offer to raise Rs. 70 lakh equity from primary market. In the process of floating the issue, it incurred certain expenses like brokerage, commission, printing of application, advertising etc. Identify the money market instrument that can be used for financing this cost.a)Call moneyb)Treasury billc)Commercial paperd)Commercial billCorrect answer is option 'C'. Can you explain this answer?.
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