Question

A foreign company wants to collect money from the capital market of India. The
Financial Manager of the company wants to issue such a financial instrument, which
instead of being in dollars, shall be denominated in rupees, as it can be listed in any
Indian Stock Exchange thereafter.
(a) Identify the Financial Instrument indicated in the above situation.
(b) Explain the features of this Financial Instrument.

Answer 1

The type of financial instrument indicated in the above situation is shares. Share capital denotes the amount of capital raised by the issue of shares by a company.

• The features of shares are:
• It is the owned capital of the company. Since it is the shareholder's money which are the actual owners of the company does it is an own capital.
• It is a very dependable source of energy and raises the creditworthiness of the company.
• It is beneficial for the diversification and expansion of business activities.