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

Right shares are issued to

  1. promoters for the services

  2. holders of convertible debentures

  3. existing shareholders

  4. All of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A rights issue is a dividend of subscription rights to buy additional securities in a company made to the company's existing security holders.

Multiple choice commerce sources of business finance - 2 gdrs, adrs and idrs depository receipts international sources

American depository receipt fee varies from one cent to ___ cents per share depending upon the ADR amount and its timing.

  1. Four

  2. Three

  3. Five

  4. Ten
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

American depository receipt fee varies from one cent to 3 cents per share depending upon the ADR amount and its timing.American Depository Receipt (ADR) is a certified negotiable instrument issued by an American bank suggesting the number of shares of a foreign company that can be traded in U.S. financial markets. Common types of ADR are: mediation, concilation, arbitration.

Multiple choice commercial studies sources of business finance - 2 gdrs, adrs and idrs depository receipts international sources

Depository bank has right to issue one GDR certificate for _______ shares.

  1. 2 to 10

  2. 3 to 5

  3. 4 to 8

  4. 5 to 10
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

GDR is a foreign currency denominated derivative instrument in the form of depository receipt created outside India and issued to non-resident investors. GDR stands for Global Depository Receipt. It is a bank certificate issued in more than one country for shares in a foreign company.Depository bank has right to issue one GDR certificate for 2 to 10 shares.

Multiple choice business organisation and correspondence company secretary managers of the company secretary joint stock company 5 - direction and management

Directors may not declare immediate dividends under which of the following condition(s)?

  1. The Company may be young and growing

  2. The company is likely to become insolvent it it pays dividends

  3. It may be in need of additional capital which cannot be raised except at a very high cost

  4. All the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Directors may withhold dividends if the company is in a growth phase, faces insolvency risks, or requires capital that would be too expensive to borrow externally.

Multiple choice commercial studies classification of commercial organisations public, private and joint sector private and public sector sectoral organisation of business departmental undertakings meaning and features of departmental undertaking

Minimum paid up share capital in case of a private company is _______.

  1. $1$ Lakh
  2. $2$ Lakhs
  3. $3$ Lakhs
  4. $4$ Lakhs
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Companies Act, 2013 earlier mandated that all Private Limited Companies have a minimum paid up capital of Rs.1 lakh. 

This meant that Rs.1 lakh worth of money had to be invested in the company by purchase of the company shares by the shareholders to start business.

Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

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

  1. 15

  2. 20

  3. 25

  4. 30
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

Multiple choice organisation of commerce and management public sector undertakings & global enterprises departmental undertakings meaning and features of departmental undertaking government organisation classification of commercial organisations

The liability of the member of the company is limited to the extent of the ________ of the shares held by them.

  1. Unpaid value

  2. Paid value

  3. Nominal value

  4. All of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Also referred to as face value or par value, nominal value is the value shown on the face of a security certificate or instrument, including currency. The concept most commonly applies to stocks and bonds but is especially important to bond and preferred stock investors.Every share has a nominal (or par) value. It may be a £1 share or a 10p share, or whatever. The nominal value is usually expressed in sterling, but can be in any currency. A company may not issue any share at a discount, i.e. may not sell it for less than its nominal value: CA 2006, sec580.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

The following section/s of the Indian Income Tax govern the receipt of income by way of dividend by companies

  1. SEc 80k

  2. Sec. 80M

  3. Sec. 80N

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Sections 80K, 80M, and 80N of the Income Tax Act all relate to deductions or provisions concerning dividends received by companies, making 'All of the above' the correct choice.

Multiple choice commercial studies stakeholders in commercial organisation internal & external stakeholders and distinction between shareholders, stakeholders and customers stakeholders final accounts of companies

If authorized by the____________ a company may received from a shareholder the amount remaining unpaid on shares, even though the amount has not been called up which is known as calls-in-advance.

  1. Memorandum of Association (MOA)

  2. Articles of Associtaion (AOA)

  3. Prospectus

  4. Securities Exchange Board of India.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Article of Association(AOA):-
The Articles of Association or AOA are the legal document that along with the memorandum of association serves as the constitution of the company. It is comprised of rules and regulations that govern the company’s internal affairs.
The articles of association are concerned with the internal management of the company and aims at carrying out the objectives as mentioned in the memorandum. These define the company’s purpose and lay out the guidelines of how the task is to be carried out within the organization. 

The articles of association cover the information related to the board of directors, general meetings, voting rights, board proceedings, etc.
The articles of association are the contracts between the shareholders and the organization and among the shareholder themselves. This document often defines the manner in which the shares are to be issued, dividend to be paid, the financial records to be audited and the power to be given to the shareholders with the voting rights.

The articles of association can be considered as the user manual for the organization that comprises of the methodology that can be used to accomplish the company’s day to day operations. This document is a binding on the shareholders and the organization and has nothing to do with the outsiders. Thus, the company is not accountable for any claims made by any external party.

The articles of association is comprised of following provisions:

• Share capital, call of share, forfeiture of share, conversion of share into stock, transfer of shares, share warrant, surrender of shares, etc.
• Directors, their qualifications, appointment, remuneration, powers, and proceedings of the board of directors meetings.
• Voting rights of shareholders, by poll or proxies and proceeding of shareholders general meetings.
• Dividends and reserves, accounts and audits, borrowing powers and winding up.
It is mandatory for the following types of companies to have their own articles:
1. Unlimited Companies: The article must state the number of members with which the company is to be registered along with the amount of share capital, if any.
2. Companies Limited by Guarantee: The article must define the number of members with which the company is to be registered.
3. Private Companies Limited by Shares: The private company having the share capital, then the article must contain the provision that, restricts the right to transfer shares, limit the number of members to 50, prohibits the invitation to the public for the further subscription of shares in the form of shares or debentures.
Multiple choice commercial studies stakeholders in commercial organisation internal & external stakeholders and distinction between shareholders, stakeholders and customers stakeholders final accounts of companies

Which of the following letter is sent to the share holders whenever an amount becomes payable on shares?

  1. Share Application Letter

  2. Share Allotment Letter

  3. Share Call Letter

  4. None of above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Share Call letter is sent to the share holders whenever an amount becomes payable on shares. Whenever an amount is to be paid out on shares, share call letter is the required document which is to be issued to th shareholders.

Multiple choice commercial studies stakeholders in commercial organisation internal & external stakeholders and distinction between shareholders, stakeholders and customers stakeholders final accounts of companies

Receiving dividends is a group right of share holders.

  1. True

  2. False

  3. Partly True

  4. Partly False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Dividends are the payments made out of distributable profits available to company. In simple terms, it is defined as that portion of profits of the company allocated to the holders of shares in the company. Shareholders do not have an automatic to receive dividend payment and also there is no legal obligation on company to declare dividends unless it is proposed by directors of the company and approved by the shareholders. Once dividend is declared by the company then it is right of shareholders to receive payment, otherwise shareholders can take legal action against the company. Therefore, the statement that receiving dividends is a group right of shareholders is incorrect.