Three of the following are forms in which a company can raise capital through the primary market. Which one is the odd one out?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Commercial bills
Option (1) Loans and deposits — A form of primary market capital. A company can raise loans and deposits through the primary market.
Option (2) Preference shares — A form of primary market capital. Preference shares are long-term ownership capital raised through new issues.
Option (3) Debentures — A form of primary market capital. Debentures are long-term borrowed capital raised through new issues.
Option (4) Commercial bills — Not a form of primary market capital. A commercial bill is a bill of exchange used to finance the working capital of business firms. It is a short-term money market instrument.
NCERT (Pre-rationalised Edition): “Primary Market … A company can raise capital through the primary market in the form of equity shares, preference shares, debentures, loans and deposits. Funds raised may be for setting up new projects, expansion, diversification, modernisation of existing projects, mergers and takeovers etc. …” “5. Commercial Bill: A commercial bill is a bill of exchange used to finance the working capital requirements of business firms. It is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms. …” |