Read the following Case Study and answer the question.

Aryan is a CEO of RS Infotech Ltd., which is a company working in the technology sector for the last 55 years. The company is doing very well in this sector and now has a growth plan of entering into cosmetics market.

Keeping in view the changing tastes and preferences Of customers, it is planning to enter organic products market.

The company targets to achieve 20% of market share in the first 2 years of its entry.

For financial issues, Aryan consulted his chief finance officer, Raj and found that it requires 50 crores of additional capital for setting up a separate cosmetics division.

The Company plans to arrange this money by issuing equity shares in the market but it lacks sufficient cash to bear the floatation cost and hence planned to approach the financial market for the same.

Identify the Money Instrument the company is going to use.

Commercial Paper

The correct answer is option 2- Commercial Paper.

The money instrument the company is likely to use for this purpose is Commercial Paper.

Commercial paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued by large and creditworthy companies to raise short-term funds at lower rates of interest than market rates. It usually has a maturity period of 15 days to one year. The issuance of commercial paper is an alternative to bank borrowing for large companies that are generally considered to be financially strong. It is sold at a discount and redeemed at par. The original purpose of commercial paper was to provide short-terms funds for seasonal and working capital needs.