0

Public deposits - class-X

Description: public deposits
Number of Questions: 16
Created by:
Tags: financing sources of business finance - 2 commerce sources of business finance business studies commercial studies sources of finance
Attempted 0/16 Correct 0 Score 0

Public deposit obtained by a company means _______________.

  1. Deposits received from Government

  2. Deposits received from public at large

  3. Deposits received from stockists and agents

  4. All the above


Correct Option: B
Explanation:

Public deposits obtained by a company means the deposits received by the company from public at large. Public deposits are unsecured, long term debt instrument. They have a slightly higher rate of interest when compared to that of interest rates of banks. They are usually issued to meet the working capital needs of the company.

State with reason whether the following statement is true or false:
The amount of deposit is a long term source of capital.

  1. True

  2. False


Correct Option: B
Explanation:

(i) A company collects the required amount of capital through different sources.
(ii) The small part of the capital is raised through borrowing
(iii) The greater part of the capital is raised by the company through the issue of shares.
(iv) The short term capital is raised by the  company accepting deposits from the general public.
(v) The deposit accepted  by the company
from the  general public are called public deposit.
(vi) A company accepts deposit for a minimum period of 6 months and for a maximum period of 3 years.
(vii) Because of the above reason, the amount of deposit is a short term source of capital.

The merit(s) of public deposits is/are ______________________.

  1. Cost of public deposits is generally lower than the cost of borrowings.

  2. Public deposits do not usually create any charge on the assets of the company.

  3. As the depositors do not have voting rights, the control of the company is not diluted.

  4. All of the above


Correct Option: D
Explanation:
Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company. The merits of public deposits are:
a) Cost of public deposits is generally lower than the cost of borrowings.b) Public deposits do not usually create any charge on the assets of the company.
c) As the depositors do not have voting rights, the control of the company is not diluted.

Limitation(s) of public deposit is/are _______.

  1. New companies generally find it difficult to raise funds through public deposits.

  2. It is an unreliable source of finance.

  3. Collection of public deposits may prove difficult when the size of deposits required is large.

  4. All of the above


Correct Option: D
Explanation:

 Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company. Limitations of public deposit are:a) New companies generally find it difficult to raise funds through public b) It is an unreliable source of finance.deposits.c) Collection of public deposits may prove difficult when the size of deposits required is large.

Public deposits refer to the unsecured deposits invited by companies from the public mainly to finance working capital needs.

  1. True

  2. False


Correct Option: A
Explanation:

Public deposits refer to the unsecured deposits invited by companies from the public mainly to finance working capital needs- this is a true statement.  Public deposits do not usually create any charge on the assets of the company.

Renewal facility enables companies to use public deposits as medium-term finance.

  1. True

  2. False


Correct Option: A
Explanation:

Renewal facility enables companies to use public deposits as medium-term finance- this is a true statement.Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company.

Public deposits of a company cannot exceed _____ per cent of its share capital and free reserves. 

  1. 15

  2. 20

  3. 25

  4. 30


Correct Option: C
Explanation:

Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company. Public deposits of a company cannot exceed 25 per cent of its share capital and free reserves.

State the following statement is True or False:
A document issued to public for collection of capital is prospectus.
  1. True

  2. False


Correct Option: A
Explanation:

A document issued to public for collection of capital is prospectus- this is a true statement.The invitation to public for capital subscriptions is through prospectust. Prospectus provide details about the offer of sale to the public. It is issued by SEBI.

State the following statement is True or False:
The invitation to public for capital subscriptions is through prospectus.

  1. True

  2. False


Correct Option: A
Explanation:

The invitation to public for capital subscriptions is through prospectus- this a true statement. Prospectus provide details about the offer of sale to the public. It is issued by SEBI.

Public deposits takes care of both _________ and _________-term financial requirements of a business.

  1. Large, medium

  2. Medium, short

  3. Large, short

  4. None of the above


Correct Option: B
Explanation:
Public deposits can take care of both medium and short-term financial requirements of a business. 
The deposits are beneficial to both the depositor as well as to the organisation. While the depositors get higher interest rate than that offered by banks.

Companies generally invite public deposits for a period upto ________ years.

  1. One

  2. Two

  3. Three

  4. Four


Correct Option: C
Explanation:
The deposits that are raised by organisations directly from the public are known as public deposits. The organization in return issues a deposit receipt as acknowledgement of the debt. Public deposits can take care of both short-term or medium-term financial requirements. Companies generally invite public deposits for medium-term period upto three years.

Cost of public deposits is generally _______ than the cost of borrowings from banks and financial institutions.

  1. Higher

  2. Lower

  3. Equal

  4. None of the above


Correct Option: B
Explanation:
The deposits that are raised by organisations directly from the public are known as public deposits. Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions.

The deposits that are raised by organisations directly from the public are known as __________.

  1. Lease finance

  2. Public deposits

  3. Commercial paper

  4. Trade credit


Correct Option: B
Explanation:

The deposits that are raised by organisations directly from the public are known as public deposits. Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions. Public deposits are beneficial to both depositor as well as the organization. 

Rates of interest offered on public deposits are usually _________ than that offered on bank deposits.

  1. Higher

  2. Lower

  3. Equal

  4. Both a and b


Correct Option: A
Explanation:
The deposits that are raised by organisations directly from the public are known as public deposits. Rates of interest offered on public deposits are usually higher than that offered on bank deposits. 

Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form. The organisation in return issues a deposit receipt as acknowledgment of the debt.

Collection of public deposits may prove difficult, particularly when the size of deposits required is _________.

  1. Large

  2. Small

  3. Medium

  4. Both a and b


Correct Option: A
Explanation:

The deposits that are raised directly from the public are public deposits. Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form. the cost of deposits to the company is less than the cost of borrowings from banks. But Collection of public deposits may prove difficult, particularly when the size of deposits required is large.

Public investment in a company is generally in the form of_______________.

  1. Shares, debentures and deposits

  2. Purchase of goods

  3. Money Transfer

  4. None of the above


Correct Option: A
Explanation:

Public investment in a company is generally in the form of shares, debentures and deposits. It means public can invest in a company by purchasing shares, debentures and deposits.

- Hide questions