Maharashtra State Board Class 12th SP Sample Paper Set 2 with Solutions Answers Pdf Download.
Maharashtra Board Class 12 SP Model Paper Set 2 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.
From the given sub questions attempt any four:
(A) Select the appropriate option from options given below and rewrite them:
(i) _____________ refers to any kind of fixed assets. (c)
(a) Authorised Capital
(b) Issued Capital
(c) Fixed Capital
Answer:
(c) Fixed Capital
(ii) A stock exchange is where stock brokers and traderscan buy & sell _____________ (b)
(a) gold
(b) securities
(c) goods
Answer:
(b) Securities
(iii) Dividend is paid first to _____________ shareholder. (b)
(a) equity
(b) preference
(c) deferred
Answer:
(b) Preference shares
(iv) In Depository system, securities are held in _____________ form. (b)
(a) scrip Based
(b) electronic
(c) physical
Answer:
(b) Electronic
(v) _____________ capital refers to a maximum capital a company can rgise. (b)
(a) Issued
(b) Authorised
(c) Paid Up
Answer:
(b) Authorised
(B) Give one word or phrase for the following sentences:
(i) What is Share?
Answer:
Share is a small unit of share capital of a company.
(ii) What are debenture trustees?
Answer:
Debenture Trustees are institutions which protect the interest of the debenture holders.
(iii) How securities are settled?
Answer:
Transfer and settlement of securities are done electronically.
(iv) Who are depositors for organisation?
Answer:
Depositors are the creditors of the company.
(v) What kind of capital Is Debenture?
Answer:
Debenture is the borrowed capital
(C) Arrange in Proper Order:
(i) (a) File return of deposit
(b) Issue Deposit Receipt
(c) Issue advertisement.
Answer:
(a) Issue advertisement
(b) Issue Deposit receipt
(c) File Return of Deposit
(ii) (a) Allotment of Shares
(b) Application of Shares
(c) Share Certificate.
Answer:
(a) Application of Shares
(b) Allotment of Shares
(c) Share Certificate
(iii) (a) Board Meeting
(b) Allotment of Debentures
(c) Board Resolution
Answer:
(a) Board Meeting
(b) Board Resolution
(c) Allotment of Debentures
(iv) (a) Payment of Deposits
(b) Deposit Receipt
(c) Acceptance of Deposit
Answer:
(a) Acceptance of Deposits
(b) Deposit Receipt
(c) Payment of Deposit
(v) (a) Board Meeting
(b) Shareholder approval
(c) Board’s Recommendations.
Answer:
(a) Board Meeting
(b) Board’s Recommendations
(c) Shareholder approval
(D) Match the pairs:
| Group “A” | Group “B” |
| 1. Financial planning | a. Dividend |
| 2. Public deposit | b. Less applications than expected |
| 3. Private placement | c. Owned capital |
| 4. Secured debentures | d. Advance programming pf financial plan |
| 5. Return on share | e. Bonus |
| f. Issuing shares without inviting public for subscription | |
| g. Maximum 7 years | |
| h. Security about repayment | |
| i. Maximum 36 months | |
| j. Management of business activities |
Answer:
| Group “A” | Group “B” |
| 1. Financial planning | j. Management of business activities |
| 2. Public deposit | c. Owned capital |
| 3. Private placement | f. Issuing shares without inviting public for subscription |
| 4. Secured debentures | h. Security about repayment |
| 5. Return on share | e. Bonus |
Question 2.
Explain the following terms / concepts in detail: (Any 4 out of 6):
(i) Overhead
(ii) Stock Exchange
(iii) Interim Dividend
(iv) Investment Decision
(v) Initial Public Offer
(vi) Net Worth
Answer:
(i) Overhead means indirect cost or expenses required to run business.
(ii) 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.
(iii) Dividend declared by the Board of Directors between two Annual General Meetings is called Interim Dividend.
(iv) Once the business firm has gained access to capital, the finance manager has to take decision regarding the use of the funds in systematic manner so that it will bring maximum return for its owners.
(v) Initial Public Offer refers to the process of offering shares of a company to the public for the first time.
(vi) Net Worth is the total of paid up capital + free reserves + securities premium account after deducting accumulated losses deferred expenses and miscellaneous expenses not written off.
Question 3.
Study the following case / situation and express your opinion. (Any 2):
(i) ABC Limited, a registered company; has a clause of accepting deposits from General Public in Memorandum of association.
(a) Management has not passed a resolution in board meeting for accepting deposits.
(b) Shareholder has not accepted the resolution, still company receives deposit from general public.
(ii) Gillete Ltd. Company’s capital structure is made up of 1,00,000 equity shares having face value of ₹ 10 each. The company has offered to the public 40,000 equity shares and out of this, the public has subscribed for 30,000 equity shares. State the following:
(a) Authorised Share Capital
(b) Issued Share Capital
(c) Subscribed Capital
(iii) Aspire is a listed public company of which board of director recommended ₹10/- per share as a dividend to equity shareholders.
(a) Aspire Ltd. takes approvalfrom Shareholders
(b) Aspire Ltd. paid dividend partly in cash and partly in kind. Is it permissible according to the law?
Answer:
(i) (a) For accepting public deposits, management should pass a resolution in Board Meeting regarding quantum of deposits. And once approved from the management the same can be placed before shareholder.
(b) Shareholder has not accepted the proposal but still management decides to take deposit from Public which is itself a contravention to the act Hence, management should not accept the deposit from general public
(ii) (a) Authorised capital of Gillete Ltd. is ₹ 10,00,000/- comprising of 1,00,000/- shares @10 each.
(b) Issued Share Capital is ₹ 4,00,000/- comprising of 40,000 shares @ 10 each.
(c) Subscribed Share Capital is ₹ 3,00,000/- comprising of 30,000 shares @10 each.
(iii) (a) Aspire Ltd.’s Board of Director proposed Dividend Payable; which should be mandatorily approved by shareholders in Annual GeneraL Meeting. Only after the due approval it is considered to be approved and declared by the organisation.
(b) As per the provisions of the Companies Act, dividend should be paid in cash and not in kind. In case of Aspire Ltd; dividend paid in kind is a contravention of law.
Question 4.
Distinguish between (Any 3):
(i) Fixed Capital & Working Capital
(ii) Initial Public Offer & Further Public Offer
(iii) Transfer of Shares & Transmission of Shares
(iv) Fixed Price Issue Method & Book-Building Method
Answer:
(i) 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. |
(ii) 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. |
(iii) Transfer of shares and Transmission of shares.
| Points | Transfer of Shares | Transmission of Shares |
| 1. Meaning | Transfer of shares means voluntarily or deliberately giviflg away one’s shares to another person by entering into a contract with the buyer. | It means transfer of ownership of a member’s shares to his legal representative due to operation of law. It takes place on death, insolvency or insanity of the members. |
| 2. When done? | It’is done when the member wants to sell his shares or give his shares as gift. | It is done when the member dies or becomes insolvent or insane. |
| 3. Nature of Action | It is a voluntary action taken by the member. | It is an involuntary action. It is due to operation of law. |
| 4. Parties involved | In transfer of shares, there are two parties involved- the member who is called as transferor and the buyer who is called as transferee. | There is only one party e.g. the nominee of the member in case of death of the member or the legal representative. |
| 5. Instrument of Transfer | Transfer requires Instrument of transfer. It is a contract between the transferor and transferee. | No Instrument of transfer is needed. |
| 6. Initiated by | Transferor initiates the transfer process. | Legal representative or official receiver initiates the process of transmission. |
(iv) Fixed Price Issue Method & Book-Building Method:
| Points Fixed | Price Issue Method | Book-Building Method |
| Meaning | Under this method, the issue price of shares is mentioned in the prospectus and investors have to buy shares only at that price. | Under this method, the issue price is determined by a bidding process. The investors are given a price band and are asked to bid at a price within the band. This way company arrives at a price at which it will sell its shares. |
| Price of Shares | The exact price of shares is known in advance and it is mentioned in the prospectus. | The price of shares is not known in advance. Only the minimum price and maximum price at which the company is willing to sell the shares is known in advance. |
| Prospectus | Company has to issue a prospectus and it contains the details of price at which shares are offered and the total number of shares offered by the company. | Company issues a Red Herring Prospectus. It contains only the price band and the total size of issue. |
| Determination of Demand | Company comes to know the public demand for its shares only after the closure of the issue. | Company can know the public demand for its shares everyday. The bids are registered in the book everyday till the closure of the issue. |
| Payment of Application Money | Application money or entire money has to be paid by the investor at the time of submitting his application for shares. | Only application money has to be paid at the time of bidding. Money will be collected only after the issue price has been fixed. |
| Usage | It can be used for any issue i.e., Public Issue, Rights Issues, ESOS, etc. | It is usually used in Public issues, i.e., IPO and FPO. |
Question 5.
Answer the following questions in brief (Any 2):
(i) Explain the important functions of Financial Market
(ii) What is Interim Dividend. Explain its Features?
(iii) What is retained earnings. Explain Determinants of retained earnings?
Answer:
(i) Functions of Financial Market (Any 8):
(a) Transfer of Resources: Financial Market facilitate the transfer of real economic resources from lenders to the ultimate users.
(b) Productive Usage: Financial market allows productive use of the funds. In the hands of the investors, their excess funds would have remained idle. Borrowers use these funds for productive purposes.
(c) Enhancing Income: Financial market allows lenders to earn interest or dividend on their surplus fund, thus leading to the enhancement of the individual and the national income.
(d) Capital Formation: Financial market provides a channel through which savings flow to industrial and commercial organisations in the form of capital. This leads to capital formation.
(e) Price Determination: The financial instruments traded in a financial market get their prices from the mechanism of demand and supply. The investors are the suppliers of the funds and the corporates are the users. The interaction between the two and other market factors will help to determine the prices.
(f) Sale Mechanism: Financial market provides a mechanism for selling of a financial asset by an investor so as to offer the benefit of marketability and liquidity of such assets.
(g) Mobilizing Funds: Idle funds in the hands of the investors can be productively used by corporates. Investors that have savings must be linked with corporates that require investment So financial market enables the investors to invest their saving according to their choices and risk assessment This will utilize idle funds and the economy will boom.
(h) Liquidity financial market providesa mechanism for Liquidating the financial instruments. This means at any given time, the investor can sell their financial instruments and convert them into
cash. This is an important factor for investors who do not want to invest for a tong period of time.
(i) Easy Access: Both investors and industries need each other. The financial market provides a platform where both the buyers and sellers can find each other easily.
(j) Industrial Development: Financial market helps in transforming savings into capital. Corporates use the funds of investors to undertake productive or commercial activities thereby, leading to economic development.
(ii) Meaning: Dividend declared by the Board of Directors between two Annual General Meetings is called Interim Dividend. Interim dividend is paid g in the middle of the accounting year i.e.. before the finalisation of annual accounts for the year.
Features of Interim Dividend (Ant 8):
(a) The Board of Directors has the power to declare Interim Dividend.
(b) Interim Dividend is only a payment on account of the whole dividend for the year.
(c) Company should provide depreciation for the entire year and not proportionately for a part of the year before declaring the Interim Dividend..
(d) Interim dividend cannot be paid out of any reserves.
(e) Articles of Association of the company must authorize the Board of Directors to declare Interim Dividend.
(f) The Board Meeting has to pass a resolution for declaring the Interim Dividend.
(g) The amount to be given as Interim Dividend must be credited in a separate Bank account in a scheduled bank within 5 (five) days of its declaration.
(h) Interim Dividend should be paid within 30 days of its declaration.
(i) Unpaid / Unclaimed Interim Dividend should be transferred to ‘Unpaid Dividend Account within 7 days of the expiry of 30 days of declaration i.e., 37 days of its declaration.
(j) Any amount remaining unpaid/unclaimed in the ‘Unpaid Dividend A/c for 7 (seven) years should be transferred to IEPF.
(iii) Meaning: “The process of accumulating corporate profits and their utilisation in business is called retained earnings.”
Determinants of retained earnings:
(a) Total Earnings of the Company: If there is ample profit, company can save and retain some parts of profit. More the earnings, more the savings of a company. Attitude of top management also determines the amount of retained earnings.
(b) Taxation Policy: The taxation policy of government is also an important determinant of corporate savings. If the taxes levied are at high rates, company cannot save much of the profits in the form of reserves.
(c) Dividend Policy: It is a policy of Board of Directors in regards with the distribution of profits. A conservative dividend policy is needed for having good accumulation of profit. But this policy affects shareholders as they get dividend at a lower rate.
(d) Government Control The government is a regulatory body of economic system of a country. Its policies, rules and regulations ensures that the companies work as per its regulations. Company has to formulate it’s dividend policy in accordance with the rules and regulations framed by the Government.
Question 6.
Justify the following statements (Any 2):
(i) Trade credit is the soul of business.
(ii) Interest is liability / obligation of the company.
(iii) Equity shareholder enjoys certain rights.
(iv) SEBI has to perform many functions to regularise the market.
Answer:
(i) No business can run without credit’. Credit is the soul of business. Trade credit financing is the major source of short-term financing. Manufacturers, wholesalers and suppliers of goods or materials are called ‘trgde creditors’. They sell tangible goods to other business concerns on the basis of deferred payment, i.e., future payment credit is extended by these business concerns with an intention to increase their sales.
The business firm extends credit, also because of custom that has been built up overtime. Trade credit is not cash loan. It results from a credit sale of goods / services, which has to be paid at a future date after the saLes takes place. In other words, when goods are delivered by supplier to a customer and the payment is made after some time, it is known as trade credit.
(ii) Interest is the cost of renting money, for the borrower and it is the income from lending money for the lender. Features of interest are:
(a) Interest is the price paid for the productive services rendered by capital
(b) It is directly related to risk. Higher the risk, higher is the interest.
(c) Rate of Interest is expressed as annual percentage of principal
(d) Rate of interest is determined by various factors like money supply, fiscal policy, volume of borrowings, rate of inflation, etc.
(e) Interest is a charge against the profit of the company. Even if company makes no profit, interest should be paid.
(f) It is payable at a fixed and generally predetermined rate.
Company has to pay interest if it has borrowed money from creditors like Debenturesholders, Depositors, Bond holders, etc.
(iii) Equity Shareholders enjoy certain rights as given below:
(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 the profit, when distributed as dividend. If the company is successful and makes handsome profit, they have advantage of getting large dividend.
(c) Right to inspect books: Equity shareholders have right 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..
(iv) The various functions of SEBI are (Any 8):
(a) To protect the interest of investors in securities market.
(b) To promote the development of securities markets.
(c) To regulate the business in stock exchanges and any other securities market.
(d) To register and regulate the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustee of trust deeds, registrars to an issue, merchants bankers, underwriters and such other intermediaries who may be associated with securities market.
(e) To register and regulate the working of the Depositories, Depository Participants, Custodians of securities, foreign institutional investors, credit rating agencies.
(f) To register and regulate the working of venture capital funds and collective investment schemes including mutual funds.
(g) To promote and regulate self-regulatory organizations.
(h) To prohibit fraudulent and unfair trade practice relating to securities markets.
(i) To promote investors’ education and training of intermediaries of securities market.
(j) To prohibit insider trading in securities.
Question 7.
Answer the following questions in detail (Any 2):
(i) Write a letter for repayment of deposit to Dhiraj Ltd.
(ii) Write a .letter for redemption of Debenture.
(iii) Write letter for resolving query for Shree Cement Industries Ltd.
Answer:
(i) Dhiraj Limited
(ii)
|
Aventure India Limited Phone No: XXXXXXXXXX Website : www.aventureindialtd.com Sub.: Repayment of Deposits Dear Madam, Yours Faithfully, |
(iii) Resolving query of Share Holder-format
|
Shree Cement Industries Limited Phone : 022-24245052 Website: www.gurulimited.com Mr. Kishor Malpani 15/21, Lotus Apt, Sub: Resolving Query on Low Rate of Dividend made by the Company Dear Sir, Yours faithfully |
Question 8.
Answer the following questions in detail (Any 1):
(i) Explain Pricing methods to offer shares to the public.
(ii) State benefits of depository to Investors.
Answer:
(i) Public Issue or Public offer of Shares: Public Issue or offer means offering the shares to the public. This is the most common method used by the companies. The company invites the public to subscribe for its shares by issuing prospectus.
A company can use two pricing methods to offer shares to the public:
(a) Fixed Price Issue Method: Under this method, the company states in its prospectus, the quantity and the price at which the shares are offered to the public. The subscribers / investors are asked to pay a certain portion of face value of shares or entire issue price along with the application. The company comes to know the demand of its shares only after the subscription period ends. Company can issue shares at par or premium. Fixed Price method is used for all types of issues, i.e., Public Issue, Right Issue, ESOS, etc.
(b) Book-Building Method: Under this method, the issuer company determines the number of shares and the issue price at which its shares will be sold by bidding process. The company issues a Red Herring Prospectus which contains price range or price band and asks the investors to bid on it. The lower end of the price band is called as ‘floor price’ while the highest end is called as cap price’ or ‘ceiling price’. The final price at which shares are offered to the investors is called as ‘cut-off’ pries’. Investors can bid any numbers of shares that they are willing to buy at any price within the price band. Bidding is kept open for 5 days. The bids along with the application money is to be submitted to the Lead Merchant Bankers called as ‘Book Runners’ who enters the bids in a book. After bidding is over, company fixes ‘cut off price’ based on the highest or best price at which all shares on offer can be sold. Company issues a Prospectus which contains the final price. Book-Building Method is used for Public issues, i.e., IPO and FPO.
(ii) Benefits of depository to the Investors are:
(a) Elimination of Risk: All risks associated with physical certificates like delays, lost, theft, mutilation, bad deliveries, etc., are totally eliminated.
(b) 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.
(c) Easy Transfer of Shares:
1. Efforts in filling transfer forms and lodging the documents is eliminated.
2. Also the stamp duty levied on transfer of physical shares is not applicable.
3. Processing time in transfer of securities is reduced and neither the securities nor the cash is tied / held up for unnecessarily long time.
(d) Updates and Intimation:The investor is provided with the status of the holdings and transactions by DP and occasionally by the Depository too.
(e) Security against Loan: Dematerialised securities are preferred by banks and financial institutions as security against loan.
(f) No concept of ‘Lots’: The system of odd and even lot stands abolished. The market lot is one share for dematerialised securities.
(g) Nomination Facility: Individual Investors can * avail of nomination facility. This simplifies the’ process in the event of the death of the investor.
(h) Automatic Credit: The account of investor is automatically credited/debited in case of a change initiated by the company which impacts the securities. This is called ‘Corporate Action’. Few examples which can be termed as Corporate Action are : Payment of Dividend, Issue of Bonus Shares, Offering of Rights Shares, Early Redemption of Debentures, Mergers and Acquisitions, etc.