Commerce Accountancy · Economics

Equity Shares and Capital

424 Questions

Equity shares and capital topics deal with corporate share issuance, forfeiture rules, dividend distributions, and yield calculations. Questions require an understanding of financial instruments like preference shares and call options. These concepts are essential for accountancy and commerce examinations.

Share valuationDividend yieldPreference sharesShare forfeitureCapital structure

Equity Shares and Capital Questions

Multiple choice

A bank can invest in the shares of a company as pledge, mortgage or absolute owner maximum to the extent of

  1. 30% of the paid-up capital of the bank or 30% of the paid-up capital of the company, whichever is lower

  2. 30% of the paid-up capital of the bank or 30% of the paid-up capital and reserves of the company, whichever is lower

  3. 30% of the paid-up capital and reserves of the bank or 30% of the paid-up capital of the company, whichever is lower

  4. 30% of the paid-up capital of the bank or 30% of the paid-up capital of the company, whichever is higher
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In terms of Section 19(2) of the Banking Regulation Act, 1949, banks should not hold shares in any company except as provided in Sub-section (1) whether as pledgee, mortgagee or absolute owner of an amount exceeding 30% of the paid-up share capital of that company or 30% of its own paid-up share capital and reserves, whichever is less.

Multiple choice

Returns relating to shareholding of the Chairman, Managing Director or Chief Executive Officer of every banking company are to be sent to

(a) RBI (b) SEBI (c) Registrar of Companies

  1. (a), (b) and (c) all

  2. (b) and (c) only

  3. (a) and (b) only

  4. neither (b) nor (c)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Every Chairman, Managing Director or Chief Executive Officer, by whatever name called, of a banking company shall furnish to the Reserve Bank through that banking company returns containing full particulars of the extent and value of his holding of shares. Thus, option 4 is correct.

Multiple choice

For a securitization company, which of the following conditions is applicable for their capital and capital adequacy ratio?

  1. Minimum capital of Rs. 200 cr and capital adequacy ratio of 15% of the financial assets acquired by the company

  2. Minimum capital of Rs. 100 cr and capital adequacy ratio of 15% of the financial assets acquired by the company

  3. Minimum capital of Rs. 100 cr and capital adequacy ratio of 10% of the financial assets acquired by the company

  4. Minimum capital of Rs. 200 cr and capital adequacy ratio of 10% of the financial assets acquired by the company
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Every Securitization Company or Reconstruction Company shall maintain, on an ongoing basis, a capital adequacy ratio, which shall not be less than fifteen percent of its total risk weighted assets and minimum capital of Rs. 100 cr.

Multiple choice

(a) An equity share is a share which is not a preference share. (b) A preference share is one which gets regular dividend irrespective of profit position and preference in case of liquidation. (c) Debenture is a document by which a company acknowledges its indebtedness. (d) Trust receipt is a document that is an undertaking by the borrower when the goods are released by the bank to the borrower without payment being made by the borrower.

  1. (a) to (d) are correct.

  2. (a), (b) and (c) are correct.

  3. (a), (c) and (d) are correct.

  4. (b), (c) and (d) are correct.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Preference share is a share which entitles the holder to a fixed dividend, whose payment takes priority over that of ordinary share dividends. Thus, the given definition is not true.

Multiple choice

On what basis is dividend declared in a co-operative store to its members?

  1. Share capital

  2. Number of shares purchased

  3. Amount of patronage given

  4. Amount of paid up capital

  5. Equally to all members
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The profit of co-operative society is distributed to the members in the proportion of purchases made by the them, and not on shares held by them. The total amount of your patronage dividend is based upon all the purchases you made during the fiscal year, divided by the total purchases made by all active owners, then the dividend is multiplied by your share (%).

Multiple choice

ABC Co. issued 50,000 equity shares of Rs.10 at par & amount payable Rs. 5 on application, Rs. 3 on allotment & Rs. 2 on first call. All amount received on time except of 500 shares, on which first call amount is not received. Their shares forfeited and re-issued at Rs. 9 per share. What is the entry of forfeiture recored in the books?

  1. Dr. Share capital a/c 5,000 Cr. Share application a/c 2,500 Cr. Share allotment a/c 1,500 Cr. Share forfeiture a/c 1,000

  2. Dr. Share capital a/c 5,000 Cr. Share first call a/c 1,000 Cr. Share forfeiture a/c 4,000

  3. Dr. Share capital a/c 4,000 Cr. Share forfeiture a/c 4,000

  4. Dr. Share capital a/c 5,000 Cr. Share first call unpaid a/c 1,000 Cr. Share forfeiture a/c 4,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Amount paid on application & alottment transfered to share forfeiture, i.e. 4,000 [(500*5) + (500*3)].

Multiple choice

Which of the following is not a statutory provision regarding declaration and payment of dividend under Companies Act 1956?

  1. Dividend can be declared out of divisible profits only or out of money provided by the government.

  2. Dividend can be declared out of capital.

  3. Dividend can be calculated at the declared rate on paid up value of shares.

  4. Dividend can be declared on the nominal value or called up value of shares.

  5. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Dividend is never declared out of capital.