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The maximum amount beyond which a company is not allowed to raise funds, by issue of shares is its’ _____.
- a)Issued capital
- b)Reserve capital
- c)Nominal capital
- d)Subscribed capital
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
The maximum amount beyond which a company is not allowed to raise fund...
Explanation:
The correct answer is C: Nominal capital.
Definition: Nominal capital refers to the maximum amount of capital that a company is authorized to raise by issuing shares.
Explanation:
- When a company is formed, it is required to specify its authorized share capital in its Memorandum of Association.
- The authorized share capital represents the maximum amount of capital that the company is allowed to raise by issuing shares.
- This authorized share capital is also known as nominal capital.
- It is important to note that the authorized share capital is not the same as the issued or subscribed capital.
- The issued capital is the portion of the authorized share capital that has actually been issued and allotted to shareholders.
- The subscribed capital is the portion of the issued capital that has been subscribed by the shareholders.
- The reserve capital, on the other hand, refers to the portion of the uncalled capital that the company decides to keep aside as a reserve for future use.
- Therefore, the maximum amount beyond which a company is not allowed to raise funds by issuing shares is its nominal capital.
Key Points:
- Maximum amount beyond which a company cannot raise funds by issuing shares: Nominal capital.
- Authorized share capital is also known as nominal capital.
- Issued capital is the portion of the authorized share capital that has been issued and allotted to shareholders.
- Subscribed capital is the portion of the issued capital that has been subscribed by the shareholders.
- Reserve capital refers to the portion of the uncalled capital that the company keeps aside as a reserve.
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The correct answer is C: Nominal capital.
Definition: Nominal capital refers to the maximum amount of capital that a company is authorized to raise by issuing shares.
Explanation:
- When a company is formed, it is required to specify its authorized share capital in its Memorandum of Association.
- The authorized share capital represents the maximum amount of capital that the company is allowed to raise by issuing shares.
- This authorized share capital is also known as nominal capital.
- It is important to note that the authorized share capital is not the same as the issued or subscribed capital.
- The issued capital is the portion of the authorized share capital that has actually been issued and allotted to shareholders.
- The subscribed capital is the portion of the issued capital that has been subscribed by the shareholders.
- The reserve capital, on the other hand, refers to the portion of the uncalled capital that the company decides to keep aside as a reserve for future use.
- Therefore, the maximum amount beyond which a company is not allowed to raise funds by issuing shares is its nominal capital.
Key Points:
- Maximum amount beyond which a company cannot raise funds by issuing shares: Nominal capital.
- Authorized share capital is also known as nominal capital.
- Issued capital is the portion of the authorized share capital that has been issued and allotted to shareholders.
- Subscribed capital is the portion of the issued capital that has been subscribed by the shareholders.
- Reserve capital refers to the portion of the uncalled capital that the company keeps aside as a reserve.
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The maximum amount beyond which a company is not allowed to raise funds, by issue of shares is its’ _____.a)Issued capitalb)Reserve capitalc)Nominal capitald)Subscribed capitalCorrect answer is option 'C'. Can you explain this answer?
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