Question
Which of the following is not an example of sources of finance? (i) Corporate bonds (ii) Issue of shares (iii) Bonus shares (iv) Preference shares Bonus Shares Corporate bonds Issue of shares Preference shares
Answer
4.1
(175 Votes)
Una
Elite · Tutor for 8 years
Answer
Bonus Shares
Explanation
Sources of finance are the places where entities, such as people, firms, and governments, as well as countries, obtain resources, with a hope that they will receive future benefits that will claim the principal, in connection to the investment or work done for it. Here's a breakdown of each option:(i) Corporate bonds: In an attempt to raise funding, corporations may issue bonds that investors purchase. This is certainly a form of financing.(ii) Issue of shares: Issuing shares is the same as selling a portion of the company's stake to others, a widely common method of increasing funds.(iii) Bonus shares: These are shares given as a bonus to current stakeholders, at no extra expense to them. While bonus shares increase the company's share capital, they do not bring in any additional funding to the company as they are shares issued for free. Therefore, they aren't strictly a form of finance.(iv) Preference shares: Firms float preference shares to increase resources. Preference shareholders have specific benefits over equities. Like other shareholders, they receive dividends, but they get their dividends before anyone else, making preference shares an appealing financing opportunity for firms.Based on the descriptions above, all but bonus shares can be effectively utilized as finance sources. Unlike other choices, bonus shares do not cause an infusion of new money into the enterprise. While they can indirectly aid in raising finance by improving the company's market reputation and encouraging fresh investment from new and current investors, they are not a direct source of funding, as there is no inflow of money.