Question

The total amount of capital raised by a company through the issue of shares is known as:

• A. Debt Capital
• B. Equity Capital
• C. Paid-up Capital
• D. Issued Capital

Hint:

Exam Tip:
Equity Capital: Issued through shares; represents ownership.
Debt Capital: Raised through borrowing; represents a liability.
Paid-up Capital: The amount actually paid by shareholders.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
This question tests knowledge of corporate finance and the terminology related to share capital.

Step 2: Defining Key Terms:
Let's define each term:
• Debt Capital: Capital raised through borrowing (e.g., loans, debentures). It involves a fixed obligation to repay the principal and interest.
• Equity Capital (Share Capital): The total amount of capital raised by a company through the issue of shares. It represents the ownership interest in the company.
• Paid-up Capital: The portion of the issued capital that has been paid by the shareholders.
• Issued Capital: The nominal value of shares that a company has offered for subscription.

Step 3: Analyzing the Definition:
The question asks for "the total amount of capital raised by a company through the issue of shares."
This is the definition of Equity Capital (also known as Share Capital).
It represents the funds contributed by the owners (shareholders) of the company.

Step 4: Final Answer:
The total amount of capital raised by a company through the issue of shares is known as Equity Capital. Therefore, option (B) is correct.