Question

Krishna Private Limited is facing a shortage of long-term finance as it is a period of depression in

the economy.

The experts were consulted to determine the sources of the finance the company should raise.

One financial advisor Mr. Ram, advise that the company should use such a security on which it

has a tax advantage and there is no dilution of control of the shareholders. Another finance

specialist, Mr.Rishabh advised that the company should not issue any doubt or equity security but

raise such a source of long term finance which can be redeemed in easy installments.

Quoting the relevant lines from the above para, identify and explain the sources of finance

suggested by two specialists, Mr. Ram and Mr.Rishabh.​

Answer 1

Answer:

Banks are a very important part of our economy. They are the center of finance. People keep money in the banks because it is a safe and secure way to store the money. In the line with this, let’s learn further what are Commercial Banks and Financial Institutions.

Answer 2

Source of fund for Krishna Private Limited

Explanation:

• Debentures as source of finance is suggested by Mr. Ram

The  debentures is considered to be tax-deductible expense and so the cost of debentures is lower. So it has tax advantage. Debentures has no dilution of control of the shareholders because debenture holders do not have any voting rights.

• Loans from banks and Financial institutions is suggested by Mr.Rishabh.

Commercial Banks and Financial Institutions is a long term source of finance which can be redeemed in easy installments and the company should not issue any doubt or equity security.

To know more:

explain the sources of finance  suggested by two specialists, Mr. Ram and Mr.Rishabh.​

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