Maharashtra State Board Class 12th SP Question Paper 2023 with Solutions Answers Pdf Download.
Class 12 SP Question Paper 2023 Maharashtra State Board with Solutions
Time : 3 Hrs
Max. Marks: 80
Note:
(1) All questions are compulsory.
(2) Figures to the right indicate full marks for the questions.
(3) Figures to the left indicate question numbers.
(4) Answer to every question must be started on a new page.
Question 1.
(A) Select the correct answer from the options given below and rewrite the sentences: (5) [20]
(1) Company has to pay __________ to government. (a)
(a) taxes
(b) dividend
(c) interest
Answer:
(a) taxes
(2) __________ shares are issued free of cost to existina equity shareholders. (c)
(a) Equity
(b) Right
(c) Bonus
Answer:
(c) Bonus
(3) __________ is a proof of title of shares. (b)
(a) Register of member
(b) Share certificate
(c) Letter of Allotment
Answer:
(b) Share certificate
(4) Debenture Capital is a __________ capital of a company. (c)
(a) owned
(b) permanent
(c) borrowed
Answer:
(c) borrowed
(5) Dividend is paid first to __________ shareholders. (d)
(a) equity
(b) preference
(c) deferred
Answer:
(b) preference
(B) State whether the following statements are True or false: (5)
(1) Finance is related to money and money management.
Answer:
True
(2) Share certificate is issued for partly or fully paid up shares.
Answer:
True
(3) Government company can collect deposits from its’ members.
Answer:
False
(4) Depositors are given voting rights.
Answer:
False
(5) Primary market is also known as new issue market.
Answer:
True
(C) Find the odd one: (5)
(1) Face value, Market value, Redemption value.
Answer:
Redemption value
(2) Convertible debentures, Irredeemable debentures, Secured debentures.
Answer:
Irredeemable debentures
(3) Dividend warrant Interest warrant, Demat.
Answer:
Demat
(4) DP, RBI, Depository.
Answer:
RBI
(5) Final dividend, Interim dividend, Interest.
Answer:
Interest
(D) Select the correct option from the bracket: (5)
| Group ‘A’ | Group ‘B’ |
| (a) Equity shares | (1) __________ |
| (b) Operation of law | (2) __________ |
| (c) __________ | (3) Debenture certificate |
| (d) Dematerialization | (4) __________ |
| (e) __________ | (5) Oldest stock exchange in India. |
[Issued within 6 months of allotment, Physical to electronic mode, Fluctuating rate of dividend, Bombay. Stock Exchange, Transmission of shares]
Answer:
| Group ‘A’ | Group ‘B’ |
| (a) Equity shares | (1) Fluctuating rate of dividend |
| (b) Operation of law | (2) Transmission of shares |
| (c) Issued within 6 months of allotment | (3) Debenture certificate |
| (d) Dematerialization | (4) Physical to electronic mode. |
| (e) Bombay Stock Exchange | (5) Oldest stock exchange in India. |
Question 2.
Explain the following terms/ concepts: (Any FOUR) [8]
(1) Working Capital
(2) Overdraft
(3) Rights issue
(4) Depository Participant (DP)
(5) Secondary Market
(6) Stock Exchange
Answer:
(1) Working Capital:
Working capital is the capital which is used to carry out the day to day business activities. After estimating fixed capital requirement of the business firm, it is necessary to estimate the amount of capital, that would be needed to ensure smooth functioning of the business firm. A business firm requires funds to store adequate raw materials in stock.
(2) Overdraft:
Bank also allows the facility of overdraft, to its depositors, who have current accounts in the Bank. Under this arrangement, a depositor is allowed to withdrawal more than what hi has deposited. But for this extra withdrawal, which he has to repay within a short period, the bank charges interest.
(3) Right issue:
A right issue is when a company offers its current shareholders the opportunity to buy more shares at a discounted price usually, the reduced price is valid for a certain time, after which it returns to normal.
(4) Depository Participant:
An institution that serves as a conduit between investors and depositories like NSDL/CDSL is known as depository participant. A depository participants must also keep shares in a demant account in dematerialized format.
(5) Secondary Market:
Secondary market is more commonly known as the stock market or the stock exchange. Here the previously issued securities are bought and sold by the investors. After IPO, when the shares are listed at the Stock Exchange, they can be traded in the secondqry market. In this market the securities are traded between investors. There is no fresh issue in the secondary market. The main difference between the primary and the secondary market is that, in the primary market only new securities are issued, whereas in the secondary market the already existing securities are traded.
(6) Stock Exchange:
Stock exchange is a specific place where various types of securities are purchased and sold. The term securities include equity shares, preference shares, debentures, government securities and bonds, etc. including units of Mutual Funds. Stock markets act as intermediary between investors and borrowers. To provide safety and stability to the investors, Stock exchanges in India are regulated by SEBI.
Question 3.
Study the following cases/situations and express your opinion. (Any TWO) [6]
(1) Sai Ltd. Company is newly incorporated public company and wants to raise capital by selling equity shares to the public. The Board of Directors are considering various options for this. Advise the Board on the following matters:
(a) What should the company offer – IPO or FPO?
(b) Can the company offer Bonus shares to raise its capital?
(c) Can the company enter into Underwriting Agreement?
(2) Mr. Kishore wants to demat his 25 shares of Hero Company Ltd. bearing certificate no. 100 and distinctive no. 76-100:
(a) Which form is he required to fill as a written request to the DP-DRF or RRF?
(b) Does he have to fill instrument of transfer if he wishes to transfer the same, after demat?
(c) Does he have to quote certificate number and distinctive number, if he wishes to transfer his shares after it is in demat form?
(3) Diamond Company Limited is considering to declare Interim Dividend:
(a) In how many days of declaration it should transfer the funds to Dividend Account?
(b) In how many days it must pay it to Shareholders?
(c) Can the Board of Directors declare Interim Dividend out of capital?
Answer:
(1) (a) IPO—(Initial Public Offer) refers to the process of offering shares of a company to the public for the first time.
(b) Bonus shares are fully paid shares that are offered freely to existing equity shareholders in accordance with their shareholding. So the company is unable to raise capital by offering bonus shares.
(c) Company can enter into an agreement with underwriters by paying them a commission.
(2) (a) DRF.
(b) He will have to submit a Delivery Instruction Slip (DIS) to the DP.
(c) They do not have any certificate no. So, Mr. Kishore does not have to quote any such number after the shares are converted into demat form.
(3) (a) The funds should be transferred to the dividend account within 5 days from the date of declaration of an interim dividend.
(b) The interim dividend must be paid to the shareholders within 30 days of its declaration.
(c) The unpaid dividend must be transferred to unpaid dividend A/C within 37 days from its declaration.
Question 4.
Distinguish between the following: (Any THREE) [12]
(1) Fixed capital and Working capital.
(2) Shares and Debentures.
(3) Initial Public Offer (IPO) and Further Public Offer (FPO).
(4) Final Dividend and Interim Dividend.
Answer:
(1) Fixed Capital and Working Capital
| Points | Fixed Capital | Working Capital |
| 1. Meaning | Fixed capital refers to any kind of physical asset i.e. fixed assets. | Working capital refers to the sum of current assets. |
| 2. Nature | It stays in the business almost permanently. | Working capital is circulating capital. It keeps changing. |
| 3. Purpose | It is invested in fixed assets such as land, building, equipments, etc. | Working capital is invested in short term assets such as cash, account receivable, inventory, etc. |
| 4. Sources | Fixed capital funding can come from selling shares, debentures, bonds, long term loans, etc. | Working capital can be funded with short term loans, deposits, trade credit, etc. |
| 5. Objectives of Investors | Investors invest money in fixed capital hoping to make future profit. | Investors invest money in working capital for getting immediate returns. |
| 6. Risk | Investment in fixed capital implies more risk. | Investment in working capital is less risky. |
4. (2) Shares and Debentures
| Points | Shares | Debentures |
| 1. Meaning | A share is a part of share capital of a company. It is known as ownership securities. | A debenture is certificate of loan taken by a company. They are also known as creditorship securities. |
| 2. Status | A holder of shares is the owner of company. Therefore share capital is owned capital. | A holder of debenture is creditor of the company. Debenture capital is loan capital or borrowed capital. |
| 3. Nature | It is permanent capital. It is not repaid during the life of the company. | It is temporary capital. Generally, it is repaid after a specific period. |
| 4. Voting/ Right | Shareholders being owners enjoy normal voting rights in general meeting. They participate in the management of the company. | Debentureholders, being creditors, do not have any voting right. They can not participate in the management of the company. |
| 5. Return on Investment | Return on shares is called dividend. Equity shareholders receive divided at fluctuating rate where as preference shareholders receive divided at fixed rate. | Return on debenture is called interest. It is fixed at the time of issue. Interest is paid even when company has no profit. |
| 6. Security | Share capital is unsecured capital. No security is offered to the shareholder. | Debenture capital, being loan capital is secured by creating a charge on company’s property. |
4. (3) Initial public offer (IPO) and Further Public offer (FPO)
| Points | Initial Public Offer (IPO) | Further Public Offer (FPO) |
| 1. Meaning | IPO refers to an offer of securities by an unlisted /Public Company to the public for the first time. | FPO means an offer of securities by a listed Public Company to the public to raise subsequent capital. |
| 2. Type of issuer company | It is issued by an unlisted Public Company. | It is issued by a Listed Public Company. |
| 3. When issued | It is usually issued by an existing company which wants to raise capital from the public for the first time. | It is usually issued by a listed Public company when it wants to raise further capital from the public. |
| 4. Order of issue | IPO proceeds FPO. IPO is the first time sale of shares to the public. | FPO is always done after IPO. FPO is the second or subsequent sale of shares to the public. |
| 5. Listing | Company has to get itself listed for the first time before issuing IPO. | Company making an FPO is already a listed company. |
| 6. Risk | It is very risky for the investor as he cannot predict the company’s performance. | It is less risky for the investor as he has an idea of the company’s past performance and can judge its future performance. |
4. (4) Final Dividend and Interim Dividend
| Points | Interim Dividend | Final Dividend |
| 1. Meaning | It is declared and paid between two AGMs of an accounting year. | It is declared and paid after the close of the financial year. |
| 2. Who Declares | It is decided and declared by the Board of Directors in the Board Meeting. | It is decided and recommended by the Board of Directors. It is declared by the shareholders in the AGM. |
| 3. Authorization | It can be declared only if ArticLes of Association permits its declaration. | Its declaration does not need authorization by Articles of Association. |
| 4. When Declared | It is declared between two Annual General Meetings of the company. | It is declared at the Annual General Meeting of the company. |
| 5. Rate of Dividend | Rate of Interim dividend is lower than final dividend. | Rate of final dividend is always higher than Interim Dividend. |
| 6. Source | It is declared out of profits of the current accounting year. | It is declared from different sources like: current year’s profits, free reserves, capital profits, money provided by government for dividends, etc., |
| 7. Accounting | Aspect It is declared before preparation of the final accounts of the company. | It is declared only after the accounts of the year are prepared and finalised. |
Question 5.
Answer in brief: (Any TWO) [8]
(1) State the contents of share certificate.
(2) Explain four advantages of depository system for an investor.
(3) State the functions of SEBI.
Answer:
(1) Share certificate should be in Form SH-1 as prescribed under Companies (Share Capital and Debenture) Rules, 2014.
Following are the contents of a share certificate:
(i) Name of the Company, CIN, Registered office address,
(ii) Folio Number,
(iii) Share Certificate Number,
(iv) Name of Member,
(v) Nature of share, number of shares and distinctive number of the shares,
(vi) Amount paid on shares,
(vii) Common Seal if any and signature of two Directors and Company Secretary.
(2) Advantage of depository system for an investor are as follows:
- Elimination of Risk: All risks associated with physical certificates like delays, loss, theft, mutilation, bad deliveries, etc. are totally eliminated.
- Safety: It is the most safe and secure way of holding securities. The entire system functions under the Depository Act and is monitored by SEBI. E.g. The Investor can keep his account in a ‘Freeze / Lock’ mode to avoid / prevent unexpected debit or credit or both by giving instructions to the DP.
- Easy Transfer of shares:
(a) Efforts in filling transfer forms and lodging the documents is eliminated.
(b) Also the stamp duty levied on transfer of physical shares is not applicable.
(c) Processing time for transfer of securities is reduced and neither the securities nor the cash is tied/held up for unnecessarily long time. - Updates and Intimation: The investor is provided with the status of the holdings and transactions by DP and occasionally by the Depository too.
(3) SEBI was set up with the objective of promoting the securities market, protecting the interest of the investors in the securities market, and to regulate the securities market. SEBI issues rules and regulations to be followed by the issuers of securities, the market intermediaries, and the investors. It is a regulator of all the Stock exchanges in India.
The various functions of SEBI are –
- To protectthe interest of investors in the securities market.
- To promote the development of securities markets.
- To regulate the business of stock exchanges and any other securities market.
- To register and regulate the working .of stockbrokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, and such other intermediaries who may be associated with the securities market.
- To register and regulate the working of the Depositories, Depository Participants, Custodians of securities, foreign institutional investors, credit rating agencies.
- To register and regulate the working of venture capital funds and collective investment schemes including mutual funds.
- To promote and regulate self-regulatory organizations.
- To prohibit fraudulent and unfair trade practices relating to securities markets.
- To promote investors’ education and training of intermediaries in the securities market.
- To prohibit insider trading in securities.
Question 6.
Justify the following statements: (Any TWO) [8]
(1) A company can issue only certain types of debentures.
(2) All companies cannot accept deposits from public.
(3) Equity shares get last priority in payment of dividend.
(4) Capital market is useful for corporate sector.
Answer:
(1)
- Debentures are one of the principal sources of raising borrowed capital to meet long and medium term financial needs.
- Debentures are one of the principal sources of raising borrowed capital to meet long and medium term financial needs.
- A company can issue secured as well as unsecured debentures. It can also issue non-convertible debentures or debentures which can be converted fully or partly into equity shares.
- The Board of Directors of a company have the authority to issue debentures. All debentures are redeemable i.e, have to be repaid.
- The company can issue debentures to its members or make a public offer or offer it even through private placement
- Thus, it is rightly justified that, a company can issue only certain types of debentures.
(2)
- Eligible Public company, having a net worth of around ₹100 crores or more or turnover of ₹500 crores can only accept deposits from the public. Government companies can also accept deposits from the public.
- Whereas, Public company can accept deposits from its members or directors only. A private company can accept deposits from its members, directors or relatives of directors only.
- An eligible public company can invite or accept deposits from the public only after the publication of an advertisement.
- Advertisements inviting deposits must be published in English and vernacular language. The advertisement has to be signed by majority of directors or their authorized agents.
Thus, all companies cannot accept deposits from public.
(3)
- A dividend is a share in the distributable profits of the company to which the shareholder is entitled when it is formally declared by the company.
- The dividend is payable only to the registered shareholders of the company. Equity shares do not have a fixed rate of dividend. The rate of dividend depends upon amount of profit earned by company.
- If company earns more profit, dividend is paid at higher rate. On the other hand if there is insufficient-profit or loss, Board of Directors may postpone the payment of dividend.
- Equity shareholders will get dividends from residual profits. The income from equity shares is uncertain and irregular.
- Thus, Equity shares get the last priority in dividends.
(4)
- Capital Market is the market that provides Loans for long-term periods. It is controlled by SEBI.
- Capital market deals in shares, debenture bonds, mutual funds.
- The corporate sector issues these securities in the market and attracts saving from investors by offering them a variety of schemes.
- Through this market, corporates, industrial organisations, financial institutions access long¬term funds from both domestic as well as foreign markets.
- These savings become capital and get invested in the business.
- It is helpful to develop the corporate and industrial sectors. Thus, the capital market is useful for the corporate sector.
Question 7.
Attempt the following: (Any TWO) [10]
(1) Write a letter to the member for the issue of share certificate.
(2) Draft a letter to debenture holder informing him about redemption of debentures.
(3) Draft a letter to the depositor regarding repayment of his deposit.
Answer:
Question 8.
Answer the following questions: (Any ONE) [8]
(1) What is an equity share? Explain its features.
(2) Explain the statutory provisions for allotment of shares.
Answer:
(1) Equity shares are those shares that carry voting rights and provide capital on a permanent basis. They are also known as ordinary shares for being the most common type of shares. They carry no preference rights or priority in the payment of dividend and in the repayment of capital Features of Equity shares are as follows:
1. Permanent Capital:
Equity shares are irredeemable shares. The amount received from equity shares is not refundable by the company during its life time. Equity shares become refundable only in the event of winding up of the company or company decides to buyback shares. Thus equity share capital is long term and permanent capital of the company.
2. Fluctuating Dividend:
Equity shares do not have a fixed rate of dividend. The rate of dividend depends upon amount of profit earned by company. If company earns more profit, dividend is paid at higher rate. On the other hand if there is insufficient profit or loss, Board of Directors may postpone the payment of dividend. Equity shareholders cannot compel them to declare and pay dividend. The income of equity shares is uncertain and irregular.
The equity shares get dividend at fluctuating rate.
3. Rights: Equity Shareholders enjoy certain rights:
(a) Right to vote: It is the basic right of equity shareholders through which they elect directors, alter Memorandum and Articles of Association, etc.
(b) Right to share in profit: It is an important right of equity shareholders.
They have right to share in profit, when distributed as dividend. If the company is successful and make handsome profit, they have advantage of getting large dividend.
(c) Right to inspect books: Equity shareholders have rights to inspect statutory books of their company.
(d) Right to transfer shares: The equity shareholders enjoy the right to transfer shares as per the procedure laid down in the Articles of Association.
4. No preferential rights:
Equity shareholders do not enjoy preferential right in respect of payment of dividend. They are paid dividend only after dividend on preference shares has been paid. Similarly at the time of winding up the company, the equity shareholders are paid last Further, if no surplus amount is available, equity shareholders will not get anything.
5. Controlling power:
The control of company is vested with the equity shareholders. They are often described as ‘real masters’ of the company. It is because they enjoy exclusive voting rights. The Act provides the right to casta vote in proportion to share holdings. They can exercise their voting rights by proxies, without even attending meeting in person. By exercising voting right they can participate in the management and affairs of the company.
They elect their representatives called Directors for management of the company. They are allowed to vote on all matters discussed at the general meeting. Thus, equity shareholders enjoy control over the company.
6. Risk:
Equity shareholders bear maximum risk in the company. They are described as ‘shock absorbers’ when company has financial crisis. If the income of company falls, the rate of dividend also comes down. Due to this, market value of equity shares comes down resulting in a capital loss. Thus, equity shareholders are main risk takers.
7. Residual claimant:
Equity shareholders as owners are residuaLclaimants to all earnings after expenses, taxes, etc are paid. A residual claim means the last claim on the earnings of company. Although equity shareholders come last they have advantage of receiving entire earnings that is left over.
10. Right Issue:
When a company needs more funds for expansiqp purpose and raises further capital by issue of shares, the existing equity shareholders may be given priority to get newly offered shares. This is called ‘Right Issue’. The shares are offered to equity shareholders first, in proportion to their existing shareholding.
11. Face Value:
The face value of equity shares is low. It can be generally ?10 per share or even ?1 per share.
12. Market Value:
Market value of equity shares fluctuates according to the demand and supply of these shares. The demand and supply of equity shares depend on profits earned and dividend, declared. When a company earns a huge profit market value of its shares increases.
On the other hand, when it incurs losses, the market value of its shares decreases.
(2) Allotment of shares is an appropriation of a certain number of shares to an applicant and distribution of shares among those who have submitted a written application. It is governed by the Companies Act, 2013 and rules and regulations incorporated therein. The statutory provisions for allotment of shares are as follows:
(1) Registration of Prospectus:
The Company has to file a copy of prospectus with the Registrar of Companies (ROC) while raising its capital by issuing the shares to general public. When the company raises the capital privately, it has to prepare ‘Statement in lieu of Prospectus’,
(2) Application Money:
The part of the face values of shares which is collected by the company along with share application, is known as Application Money. Application money should not be less than 5% of the face value of share. SEBI has specified (for public companies) the application money should not be less than 25% of the nominal amount of shares.
(3) Depositing the Application Money:
As per this condition, the company has to deposit the money into separate account known as-Share Application Money Account’ opened in scheduled bank by the company. Company is not allowed to withdraw this amount.
(4) Minimum Subscription:
Minimum subscription is the minimum amount raised by the company for obtaining trading certificate and to start the work of allotment of shares. This amount is mentioned in the prospectus. It must be collected within thirty (30) days from issue of prospectus. Minimum subscription amount should be 90% of issued capital. Usually when a company does not collect minimum subscription, it means its issue has been under subscribed i.e. the number of shares applied for is less than the shares offered by the company. If minimum subscription is not collected within the specified time, the entire amount received as application money should be returned to the subscribers within fifteen days of closure of issue. To avoid such a situation, company may enter into an underwriting agreement with the underwriters.
(5) Appointment of Managers to the issue and various other agencies:
Company has to appoint one or more Merchant Bankers to act as managers for the public issue. It also has to appoint Registrar to the issue, Collecting Bankers, Underwriters to the issue and Brokers to the issue, Self-certified syndicate banks, Advertising agents etc.
(6) Permission to deal on Stock Exchange:
Every company, before making a public offer shall apply to one or more recognized Stock Exchanges to seek permission for listing its shares with them. The prospectus shall mention the name of the stock exchange and the fact that an application for permission to list on that stock exchange has been made by the company.
(7) Closing of the Subscription List:
As per SEBI, the subscription list must be kept open for atleast three working days and not more than ten working days. Applicants can apply for shares only when the subscription list is open.
(8) Beginning of allotment work:
The company can start the work of allotment after 5 days of opening the issue (in case of filing of prospectus) and within 3 days (in case of filing statement in lieu of prospectus). This enables the member of public to go through the prospectus thoroughly and decide.