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

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 so 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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