what are long term public deposits and what are their advantages to public
Answers
Long term public deposits are also called fixed deposits . In fixed deposits public get more money at high rate of interest. The fixed deposits cannot be withdrawn by ATM . people can store money for a long term of time at demand .
Meaning:
A company can accept deposits from the public to finance its medium- and short-term requirements of funds. This source has become very popular off late because companies offer higher interest than the interest offered by banks.
Features of Public Deposits:
1. Total public deposits cannot exceed 25 per cent of the paid up capital and free reserves of the company.
2. It is an uncertain source of financing.
3. There are legal restrictions on the acceptance and renewal of public deposits.
Advantages of Public Deposits:
i. Acquisition of finance through public deposits is very easy.
ii. Interest paid on public deposits is tax deductible expenditure.
iii. Administrative cost of issuing a public deposit is lower than the cost involved in issuing shares and debentures.
Disadvantages of Public Deposits:
i. They are uncertain and unrealistic forms of financing.
ii. Public deposits are available for short periods only.
iii. The management may misuse the deposit as these deposits are not secured.