question_answer

Mr. John has Rs.1,00,000 for investment purposes. Should he invest in equity shares, preference shares, public deposits or debentures? Justify your answer.

Answer:

Ans.     John's investment depends on many factors:

(a) If he wants control in the company or participation in management of the company, he should invest in equity shares.

(b) If he wants some certainty in returns and also wants something extra in case of huge profits, he should invest in preference shares.

(c) If he wants perfect certainty, he should invest in public deposits or debentures as rate of return is pre fixed.

(d) He also needs to see if he wants to invest for short term or long term. If he is interested in short term investment, then he should choose public deposits.

(e) If he is interested in middle term investment, he should invest in preference shares or debentures.

(f) If he is interested in long term investment, he should invest in equity shares.