Commerce Accountancy · Economics

Equity Shares and Capital

505 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 book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

A debenture holder is not entitled to _________.

  1. voting right

  2. claim dividend

  3. claim bonus shares

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

Debenture holders are lenders, not owners. Therefore, they do not have voting rights, nor are they entitled to dividends or bonus shares, which are reserved for equity shareholders.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

When a company is not earning profits, then which of the following securities proves a burden on the finances of the company?

  1. Equity Shares

  2. Preference Shares

  3. Redeemable Preference Shares

  4. Debentures
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest on debentures is a mandatory expense that must be paid regardless of whether the company earns a profit. Equity and preference dividends are typically paid out of profits.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Which of the following securities put a burden on the finance of a company, when there are no profits?

  1. Equity shares

  2. Preference shares

  3. Debentures

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

Interest on debentures is a fixed financial obligation that the company must pay regardless of its profit status, making it a burden during periods of no profit.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

Which of the following items is not an appropriation of profit for a limited company_______.

  1. Preference shares dividend payable

  2. Ordinary dividend payable by the company

  3. Income tax payable by the company

  4. Debenture interest payable
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Appropriation of profit refers to the distribution of net profit after tax. Debenture interest is a charge against profit, meaning it must be paid regardless of whether the company makes a profit or a loss, unlike dividends.

Multiple choice elements of business joint stock company 1 - definition, classification, advantages and disadvantages meaning and features of joint stock company concept, features, advantages and disadvantages of joint stock company ownership structures - joint stock company

S Ltd. acquired fixed assets worth Rs 15,00,000 by issue of shares of Rs 100 at a premium of 25%. The number of shares to be issued by S Ltd. to settle the purchase consideration = ?

  1. 12,000 shares

  2. 15,000 shares

  3. 18,750 shares

  4. 11,250 shares
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Purchase consideration = 15,00,000. Issue price per share = 100 + 25% of 100 = 125. Number of shares = 15,00,000 / 125 = 12,000.

Multiple choice elements of business joint stock company 1 - definition, classification, advantages and disadvantages meaning and features of joint stock company concept, features, advantages and disadvantages of joint stock company ownership structures - joint stock company

The amount contributed by shareholders of Joint Stock Company is called capital.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The amount contributed by shareholders in the joint stock company is termed as the share capital as it is the capital invested in the company form of business or it is the small unit in which the capital of company is divided.

Multiple choice elements of business joint stock company 1 - definition, classification, advantages and disadvantages meaning and features of joint stock company concept, features, advantages and disadvantages of joint stock company ownership structures - joint stock company

The amount contributed by shareholders of Joint Stock Company is known as capital.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The amount contributed by shareholders in the joint stock company is termed as the share capital as it is the capital invested in the company form of business or it is the small unit in which the capital of company is divided.

Multiple choice elements of business joint stock company 1 - definition, classification, advantages and disadvantages meaning and features of joint stock company concept, features, advantages and disadvantages of joint stock company ownership structures - joint stock company

The maximum amount with which a company gets registered is called __________.

  1. authorized share capital

  2. issued share capital

  3. subscribed share capital

  4. paid up share capital
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Authorized share capital, or nominal capital, is the maximum amount of share capital that a company is authorized to issue according to its constitutional documents.

Multiple choice elements of business joint stock company 1 - definition, classification, advantages and disadvantages meaning and features of joint stock company concept, features, advantages and disadvantages of joint stock company ownership structures - joint stock company

The maximum interaction with shareholders is ____________.

  1. at the time of allotment

  2. at the time of dividend distribution

  3. both a & b

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

Companies interact with shareholders primarily during the allotment of shares and when distributing dividends, as these are key financial events involving the owners.

Multiple choice elements of business joint stock company 1 - definition, classification, advantages and disadvantages meaning and features of joint stock company concept, features, advantages and disadvantages of joint stock company ownership structures - joint stock company

The capital of a company is divided into number of parts, each one of which is called ________.

  1. dividend

  2. profit

  3. interest

  4. share
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The total capital of a company is divided into small, equal units called shares, which represent ownership in the company.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Which of the following can be utilized for redemption of preference shares?

  1. The proceeds of fresh issue of debentures

  2. The proceeds of issue of fixed deposits

  3. The sale proceeds of investments

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Preference shares can be redeemed out of the proceeds of a fresh issue of shares or debentures made for the purpose of redemption. Fixed deposits and sale of investments are not standard sources for redemption under the Companies Act.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

A debenture holder gets.

  1. Dividend

  2. Right prescribed articles

  3. Ownership of the company

  4. Interest at fixed rate
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A debenture holder is a creditor of the company and is entitled to receive interest at a fixed rate, regardless of the company's profit.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Debenture premium cannot be used to.

  1. Write off the discount on issue of shares or debentures

  2. Write off the premium on redemption of shares or debentures

  3. Pay dividends

  4. Write off capital loss
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Securities premium (or debenture premium) has specific legal uses under the Companies Act. Paying dividends out of this premium is prohibited.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

ABC Ltd. has issued $3,000$ fully Convertible Debentures of Rs. $100$ each. Each Debentures is convertible into $8$ shares of Rs. $10$ each. Amount of share capital credited on conversion will be.

  1. Rs. $2,40,000$
  2. Rs. $60,000$
  3. Rs. $3,00,000$
  4. Rs. $80,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

3,000 debentures * 8 shares per debenture = 24,000 shares. 24,000 shares * 10 face value = 2,40,000 credited to share capital.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Higher dividends per share is associated with  ______________.

  1. High Earning, High Cash Flows, Unusable Earnings and Growth Opportunities

  2. High Earning, High Cash Flows, Stable Earnings and Growth Opportunities

  3. High Earning, High Cash Flows, Stable Earnings and Lower Growth Opportunities

  4. High Earning, Low Cash Flows, Stable Earnings and Lower Growth Opportunities
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

There are two primary causes for increases in a company’s dividend per share payout.

 The first is simply an increase in the company's net profits out of which dividends are paid. 
The second is a shift in the company’s growth strategy that leads the company to decide to expend less of its earnings in seeking growth and expansion, thus leaving a larger share of profits available to be returned to equity investors in the form of dividends.