Case Study Chapter 10 Financial Markets

Please refer to Chapter 10 Financial Markets Case Study Questions with answers provided below. We have provided Case Study Questions for Class 12 Business Studies for all chapters as per CBSE, NCERT and KVS examination guidelines. These case based questions are expected to come in your exams this year. Please practise these case study based Class 12 Business Studies Questions and answers to get more marks in examinations.

Case Study Questions Chapter 10 Financial Markets

1. Read the source given below and answer the following questions.
ISQAA SOLAR limited is searching options to raise ₹ 20,000 crores from the primary market for diversification and modernisation of existing projects. It hired the services of a renowned financial consultancy firm, DHAN LAXMI PVT. LTD. for suggesting options for the same. DHAN LAXMI PVT. LTD. suggested a list of options to the Board of Directors of the company. It was decided that for the immediate requirement of ₹ 1,500 crores the company will give a privilege to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. ₹ 4,500 crores would be raised by allotment of securities to a consortium of financial institutions, instead of inviting subscription from the public by making a direct appeal to investors to raise capital. It was further decided to raise capital to the tune of ₹ 6,000 crores through an issuing house. All these options were accepted by the Board of Directors. The Board further decided to raise ₹ 8,000 crores through the on-line system of the stock exchange by entering into an agreement with the exchange.

Question. How much money was raised by the company through E-IPO’s?
(a) ₹ 8,000 crores
(b) ₹ 4,500 crores
(c) ₹ 20,000 crores
(d) ₹ 6,000 crores

Question. “4,500 crores would be raised by allotment of securities to a consortium of financial institutions, instead of inviting subscription from the public by making a direct appeal to investors to raise capital.’’ Identify the method of floatation of new issues in the primary market being discussed above, which the company has decided to use.
(a) Offer for sale
(b) Private placement
(c) Right Issue
(d) Offer through Prospectus

Question. Identify the method of floatation of new issues in the primary market, not taken up by ISQAA SOLAR LTD.
(a) Offer for sale
(b) Rights issue
(c) E-IPO
(d) Offer through prospectus

Question. Identify the reason which has made the firm raise funds from the institutional investors.
(a) It helps to raise funds quickly.
(b) It is not expensive.
(c) Both (a) and (b)
(d) None of the above

2. Read the source given below and answer the following questions.
‘Ganesh Steel Ltd.’ is a large and credit-worthy company manufacturing steel for the Indian market. It now wants to cater to the Asian market and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost the company decides to tap the money market.

Question. This instrument is
(a) secured
(b) unsecured
(c) long term
(d) none of the above

Question. Money-market is a market to raise
(a) long-term funds
(b) medium-term funds
(c) short-term funds
(d) none of the above

Question. Identify the money market instrument, the company can use for the above purpose.
(a) Treasury Bill
(b) Commercial paper
(c) Call money
(d) Commercial bill

Question. What is the duration for which the company can get funds through this instrument?
(a) 1 to 364 days
(b) 1 to 90 days
(c) 15 days to 1 year
(d) None of the above

3. Read the source given below and answer the following questions.
Charu is a chartered accountant in Prakash Ltd. During the course of meeting with directors she came to know that as against the previous years, this year company is going to declare handsome dividend offer. It is observed that when such news becomes public then the share-market jumps up. Considering it, Charu purchased large number of company’s shares before this news reached the public.

Question. State the function of SEBI which checks price rigging and preferential allotment.
(a) Protective
(b) Developmental
(c) Regulating
(d) None of the above

Question. Identify the malpractice used by Charu.
(a) Price rigging
(b) Insider trading
(c) Privilege allotment
(d) None of the above

Question. SEBI protects the interests of
(a) Investors
(b) Companies
(c) Intermediaries
(d) None of the above

Question. Identify the authority that regulates such behaviour.
(a) RBI
(b) Controller of Capital
(c) SEBI
(d) State Government

4. Read the source given below and answer the following questions.
Few years ago, there were many malpractices, unfair trade practices and frauds and scams were taking place in Stock Exchange. All these affected investor’s confidence, faith and trust in Stock Exchange. The Government of India decided to set up a separate body for this purpose who was given control of stock exchange. This separated ownership and control of stock exchange.

Question. The main objective of SEBI is
(a) to stop malpractice and unfair trade practices.
(b) to increase revenue of RBI.
(c) to spread awareness about capital formation.
(d) none of the above

Question. Name the body set up by government of India to control stock exchange.
(a) RBI
(b) SBI
(c) SEBI
(d) None of the above

Question. The Index of National Stock Exchange of India is called
(a) Sensex
(b) Nifty
(c) Both (a) and (b)
(d) None of the above

Question. Name the concept which separates ownership and control of stock exchange.
(a) Dematerialisation
(b) Demonetisation
(c) Demutualisation
(d) None of the above

5. Read the source given below and answer the following questions.
Stock exchange acts as a regulator of the securities market. It creates a continuous market where the securities are bought and sold. It gives investors the chance to disinvest and reinvest. Through this process of disinvestment and reinvestment, savings get channelised into their most productive investment avenues. To ensure that the investing public gets a safe and fair deal in the market, the membership of the stock exchange is well regulated and its dealings are well defined according to the existing legal framework. It also ensures wider share ownership by regulating new issues, better trading practices and taking effective steps in educating the public about investments.

Question. Why is stock exchange called a mirror through which we can see the economic condition of every country?
(a) As it acts as an economic barometer.
(b) It helps in fixing the prices of securities.
(c) It spreads equity cult.
(d) It provides safety to transactions.

Question.“To ensure that the investing public gets a safe and fair deal in the market the membership of the stock exchange is well regulated and its dealings are well defined according to the existing legal Framework”. This line indicates which function of stock exchange?
(a) Economic barometer
(b) Pricing of securities
(c) Safety of transacting
(d) Spreading equity cult

Question. “It gives investors the chance to disinvest and reinvest”. This line indicates which function of stock exchange?
(a) Contributes to economic growth
(b) Promotes habits of saving
(c) Economic barometer
(d) Pricing of securities

Question. “Taking effective steps in educating the public about investments” indicates which function of stock exchange?
(a) Economic barometer
(b) Pricing of securities
(c) Safety of transactions
(d) Spreading equity cult

6. Read the source given below and answer the following questions.
‘Unicon Securities Pvt. Ltd.’ was established to deal in securities. It was registered as a stock broker with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to trade in securities listed at these exchanges. It is also a depository participant with CDSL and NSDL. In the first three years, it has developed its business successfully. After that the composition of Board of Directors changed. Some customers complained to the customer care centre of the company that shares purchased by them and for which the payment has been duly made, were not transferred to their D’mat Accounts by ‘Unicon securities Pvt. Ltd.’ The executive of customer care centre promised the aggrieved customers that their shares will be transferred to their respective D’mat Accounts very soon. But the company delayed the matter and didn’t transfer the shares of the customers to their D’mat Accounts.
This eroded investors’ confidence and multiplied their grievances.

Question. The grieved investors can file case in which institution?
(a) RBI
(b) SEBI
(c) NSDL
(d) CDSL

Question. NSDL and CDSL are two types of
(a) Depository participant
(b) Stock exchange
(c) Depository
(d) None of the above

Question. Sensex is the index of
(a) BSE
(b) NSE
(c) Both (a) and (b)
(d) None of the above

Question. Transfer of shares in investor’s account is related to which step in trading producers?
(a) Issue of contract note
(b) Executive order
(c) Delivery of shares and making payment
(d) Settlement cycle

7. Read the source given below and answer the following questions.
Nayar is working as P.G.T. Commerce in a CBSE affiliated school of Kerala. One day he was teaching about capital market in the class. He informed the class that during 1980’s the capital market in India witnessed a tremendous growth because of increasing participation of the public. This ever increasing investors’ population and market capitalisation led to a variety of malpractices on the part of the companies, brokers, merchant bankers, investment consultants and others involved in the securities market. These malpractices and unfair trading practices eroded investor confidence and multiplied investors’ grievances. The Government of India and the stock exchanges were helpless in redressing the investors’ problems because of lack of proper penalty provisions in the existing legislation. In view of this the Government of India decided to set up a regulatory body.

Question. Which market helps in getting long-term funds ?
(a) Capital market
(b) Money market
(c) Both (a) and (b)
(d) None of the above

Question. By keeping a check over malpracticing and unfair trade practices which objective is fulfilled by Regulatory body ?
(a) Protecting the interest of investors
(b) Development of capital formation
(c) Regulating the Stock Exchange
(d) None of the above

Question. SEBI controls
(a) Capital market
(b) Money market
(c) Both (a) and (b)
(d) None of the above

Question. Name the regulatory body which government of India decided to set up.
(a) RBI
(b) SEBI
(c) LIC
(d) UTI

8. Read the source given below and answer the following questions.
Financial market is a market for creation and exchange of financial assets. It helps to link the savers with the investors and directs available funds into their most productive investment opportunity. It also facilitates easy purchase and sale of financial assets through the stock exchange. The stock exchange not only facilitates buying and selling of existing securities but also educates public about how their investments in the financial market can yield good returns.

Question. By providing various information regarding price, availability and cost of financial securities :
(a) helps to increase the cost of transaction
(b) helps to reduce the cost of transaction
(c) does not affect the cost of transaction
(d) none of the above

Question. Name the financial market which provides capital for short term.
(a) Capital Market
(b) Money Market
(c) Stock Exchange
(d) Financial Institution

Question. Financial market provides easy and simple procedure for sale of financial assets and converts in cash. This is related to which function of financial market ?
(a) Economic barometer
(b) Provides liquidity
(c) Capital formation
(d) Economic growth

Question. Apart from liquidity which other function is referred in above case study ?
(a) Allocation of funds
(b) Capital formation
(c) Mobilise saving and channelise to most productive use
(d) Pricing of security