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

Question

If you have Rs 50,000 for investment purposes, would you invest
in equity shares, preference shares, public deposits or debentures?
Justify your answer

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 investment purposes, would you invest in equity shares, preference shares, public deposits or debentures? Justify your answer.