If you have Rs 50,000 for investement purposes would you invest in equity shares,prefrence shares,public deposits or debentures Justify - Business Studies - Sources of Business Finance

Question

If you have Rs 50,000 for investement purposes would you invest
in equity shares,prefrence shares,public deposits or debentures?
Justify

Ritika Chauhan · Accepted Answer

Investment decisions are very subjective, as they differ from
one individuals to the other If a person is risk loving and he/she
would want to reap in large amount of profits of the firm as well
as have some share in its ownership, then he/she will invest this
amount in Equity share While, if he/she is not very risk loving and
want to have a fixed rate of return along with ownership rights
then, preference shares are a better option
However, if the individual is very risk averse (person who
prefers less risk) then, he or she can go for either debentures or
public deposits Both will entitle him/her to a fixed return Also
the time of repayment of both the return and principle will be
fixed in case of debentures and public deposits
So, we can say that the following factors will affect the
individuals investment decision
1 Whether he/she is risk loving or risk averse
2 The rate of return (Dividend or Rate of interest)
3 Goodwill of the firm

If you have Rs 50,000 for investement purposes would you invest in equity shares,prefrence shares,public deposits or debentures? Justify.