Question

What are public deposits ? Explain four merits of public deposit as a sources of business finance.

Answer 1

✔️PUBLIC DEPOSITS :

➡️Public deposits refer to the unsecured deposits invited by companies from the public mainly to finance working capital needs. A company wishing to invite public deposits makes an advertisement in the newspapers.

✔️MERITS OF PUBLIC DEPOSITS

➡️ Acquisition of finance through public deposits is very easy.

➡️ Interest paid on public deposits is tax deductible expenditure.

➡️Administrative cost of issuing a public deposit is lower than the cost involved in issuing shares and debentures.

➡️Since the rate of interest paid on a public deposit is fixed, it helps the company play trading on equity.

➡️It does not dilute the control of shareholders.

Hope this helps you.

Mark as brainliest if helpful