CS Executive · Capital Market and Securities Laws · Basics of Capital Market
Meera Textiles Ltd. wants to raise funds that give the holders ownership in the company, a claim on residual profits after all other claims are met, and normally voting rights. Which capital market instrument best fits this description?
Equity shares fit the description because they give holders ownership of the company, a residual claim on profits and assets after creditors and preference holders are paid, and ordinarily voting rights. Debentures only create a creditor relationship, and the other two are money market instruments.
- AEquity sharesCorrect
- BDebentures
- CTreasury bills
- DCommercial paper
Explanation
Equity shares represent ownership and a residual claim on profits and assets, usually with voting rights. Debentures are debt and give creditor status with fixed interest. Treasury bills and commercial paper are short-term money market instruments, not ownership instruments.
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