Business and Commerce MCQ Questions and Solutions with Explanations | Commerce

Promoter is a person who takes part in the incorporation of a company. A promoter is the one, who undertakes to form a company with reference to a given object and sets it going and takes the necessary steps to accomplish that purpose.

Section 3 of companies act 2013 (1) A company may be formed for any lawful purpose by— (a) seven or more persons, where the company to be formed is to be a public company; (b) two or more persons, where the company to be formed is to be a private company; or (c) one person, where the company to be formed is to be One Person Company that is to say, a private company, by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of registration

A private company should have at least 2 members.

The charter of a company is its memorandum of association. An important step in the formation of a company is to prepare a document called memorandum of association. It is the charter of the company and is very important document as it contains the basic conditions on which the company is incorporated.

An association of 25 people not registered under the companies act, but carrying on business, is an illegal association. An illegal association is not recognised by law.

A partnership firm cannot raise funds by debentures. A common source of funding for a new or expanding partnership is the pockets, deep or otherwise, of the partners themselves. Known as self-funding or bootstrapping, consider how much of your own financial resources you can put in toward your business, and ask your partners to do the same. Sources can include savings, stocks and bonds, and even retirement account funds.

The term Capitalization is used in relation to Joint stock companies. Capitalization is the sum of a corporation's stock, long-term debt, and retained earnings. Capitalization also refers to the number of outstanding shares multiplied by share price.

Over-capitalization results from raising more money than can be profitably used. Over-capitalisation takes place when a company raises more money by the issue of shares and debentures than can be profitably used.

Equity shares securities is not redeemable. Issuing redeemable equity shares would mean company is willing to pay back entire amount of the money invested by the equity shareholders. Hence, the companies act does not allow the equity shares to be redeemed.

Preference shares are those which carry preferential right in respect of both dividend and repayment of capital.