Back to Main Page

Multiple Choice Questions

The cost in the process of raising funds through equity is known as ........

Business Studies (CUET) Sources of Business Finance

Download Solution PDF

The cost in the process of raising funds through equity is known as __________.

This questions was previously asked in

CUET BUSINESS STUDIES Previous Year Paper (2022)

View All cuet Previous Year Papers

Financial risk

Cost of debt

Floatation cost

Cost of capital

छोटे Courses बड़े Results

Master Sources of Business Finance

Prepare through Micro-courses

Try Now

Explanation:

Explanation:

The cost incurred by a company while raising funds through the issue of shares (equity) is known as Floatation Cost.

It includes various expenses such as:

Brokerage
Commission
Underwriting fees
Legal fees
Advertising charges
Printing of prospectus

Why Other Options Are Incorrect:

Option	Explanation
A: Financial risk	Financial risk refers to the risk of not being able to meet fixed financial obligations, not the cost of raising funds.
B: Cost of debt	Cost of debt is the interest paid on borrowed funds (loans or debentures), not equity.
D: Cost of capital	Cost of capital is the overall cost of financing a business including both debt and equity, but floatation cost is a more specific term for the expense of raising funds through equity.

Conclusion:

Floatation cost directly refers to the expenses associated with raising equity capital through shares or debentures.

? Correct Answer: C: Floatation cost

Profile ResourcesReport error

Submit Error

Let's Discuss

Explore
Micro
Courses

Free
Video
Courses

Free
Test
Series

Free
PDF
Documents