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Question : Case Study: UVW Industries - Sustainable Financing for Green Initiatives

UVW Industries is a company committed to sustainable practices and is undertaking environmentally friendly initiatives. The company is exploring various sources of business finance to support its green projects.

Questions : Equity Shares and Preference Shares

What is the main advantage of equity shares for UVW Industries?

Option 1: Fixed dividend payments
 

Option 2: Ownership without dilution
 

Option 3: Higher interest payments

 

Option 4: No redemption option


Team Careers360 13th Jan, 2024
Answer (1)
Team Careers360 16th Jan, 2024

Correct Answer: Ownership without dilution


Solution : The correct answer is (b) Ownership without dilution

Equity shares represent ownership in the company, allowing shareholders to have a stake in the business without the obligation of fixed dividend payments. By issuing equity shares, UVW Industries can raise capital and fund its operations without taking on debt. Additionally, it does not have the obligation to make fixed interest or dividend payments, providing greater financial flexibility. However, it's important to note that issuing equity shares may dilute the ownership stake of existing shareholders, but it does not involve a fixed payment obligation as with debt instruments like debentures.

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