Bb0022 Solved Assignment
Bachelor of Business Administration-BBA Semester 5
BB0022 Capital and Money Market - 4 Credits
(Book ID: B0101)
Assignment (60 Marks) 1. Explain the securities market and discuss the methods of underwriting the securities.
Ans. Securities Market: The bulk of the financial needs (long term financial requirements) of a company are met by rising through the securities like equity shares, preference shares, debentures and bonds. The term securities market is a comprehensive one and refers to the buyers and sellers of securities and also the structure comprising all those agencies and institutions which help in the sale and resale of company securities. There are different types of business organizations in India namely partnership firm, cooperative societies, private & public limited companies and joint sector organizations etc. The more frequently organized method is the company registered under the Indian companies Act, 1956. Under this act, there are three types of companies:
a) Companies Limited by guarantee.
b) Companies which are private limited companies – limited by shares paid up.
c) Companies which are public limited companies – limited by shares paid up.
Under this act, the private limited companies can have 50 members and their shares are not transferable freely. These companies reserve the right to refuse any transfer of shares and as such trading in them is restricted. Due to these inhibitive features, private limited companies do not have any access to the securities market.
Methods of Underwriting An underwriting agreement may take any of the following forms.
i) Standing behind the Issue: Under this method, the underwriter guarantees the sale of a specified number of shares within a specified period. If the public does not take up the whole of the specified amount of the issue, the underwriters standing behind the issue come forward to purchase the balance. ii) Outright Purchase: Underwriters purchase the issue outright and
BB0022 Capital and Money Market - 4 Credits
(Book ID: B0101)
Assignment (60 Marks) 1. Explain the securities market and discuss the methods of underwriting the securities.
Ans. Securities Market: The bulk of the financial needs (long term financial requirements) of a company are met by rising through the securities like equity shares, preference shares, debentures and bonds. The term securities market is a comprehensive one and refers to the buyers and sellers of securities and also the structure comprising all those agencies and institutions which help in the sale and resale of company securities. There are different types of business organizations in India namely partnership firm, cooperative societies, private & public limited companies and joint sector organizations etc. The more frequently organized method is the company registered under the Indian companies Act, 1956. Under this act, there are three types of companies:
a) Companies Limited by guarantee.
b) Companies which are private limited companies – limited by shares paid up.
c) Companies which are public limited companies – limited by shares paid up.
Under this act, the private limited companies can have 50 members and their shares are not transferable freely. These companies reserve the right to refuse any transfer of shares and as such trading in them is restricted. Due to these inhibitive features, private limited companies do not have any access to the securities market.
Methods of Underwriting An underwriting agreement may take any of the following forms.
i) Standing behind the Issue: Under this method, the underwriter guarantees the sale of a specified number of shares within a specified period. If the public does not take up the whole of the specified amount of the issue, the underwriters standing behind the issue come forward to purchase the balance. ii) Outright Purchase: Underwriters purchase the issue outright and