THE INDIAN COMMUNITY SCHOOL, KUWAIT

TIME ALLOWED : 3 HOURS NAME OF STUDENT : …………………………………………………

MAX. MARKS : 80 ROLL NO. : ……………….. CLASS/SEC : ……………..

NO. OF PAGES :4

BUSINESS STUDIES

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General Instructions : (i) Answers to questions carrying 1 mark may be from one word to one sentence.

(ii) Answers to questions carrying 3 marks may be from 50 – 75 words.

(iii) Answers to questions carrying 4 – 5 marks may be about 150 words.

(iv) Answers to questions carrying 6 marks may be about 200 words.

(v) Attempt all parts of a question together.

1.In the paint industry, various raw materials are mixed in different

proportions with petroleum for manufacturing different kinds of paints. One

specific raw material is not readily and regularly available to the paint manufacturing companies. Berger Paints Company is also facing this problem

and because of this there is a time lag between placing the order and the actual

receipt of the material. But, once it receives the raw materials, it takes less time in converting it into finished goods.Identify the factor affecting the working

capital requirements of this industry. (1)

2. Fair &Lovely ‟ is a natural and ethical beauty brand famous for offering

organic beauty products for men and women. The company uses plant based

materials for its products and is the leading beauty brand in the country. It not

only satisfies its customers but also believes in overall protection of the

environment and the planet.Identify the marketing management philosophy

beingfollowed by „Fair & Lovely.‟ (1)

3.Of ICR and DSCR ,which is a better ratio affecting the choice of an optimal

capital structure and why? (1)

4.An investor wanted to invest Rs20,000 in Treasury Bills for a period of 91

days. When he approached the Reserve Bank of India for this purpose he came

to know that it was not possible. Identify the reason why the investor could not invest in the Treasury Bill.

(1)

5. On the eve of Diwali Kalpana purchased two kilograms of sweets from Mughal sweets.On consumption of sweets her two children and husband fell sick and

were to be hospitalized. Kalpana wanted to file a case in the consumer forum

but could not do so because she did not have any proof of buying sweets from

CODE : N 054 SERIES : II TERM /FN/ 2018 - 2019

Mughal sweets. What proof could Kalpana have obtained for filing the claim in

the consumer court? (1)

6.Define “Trading on equity”. (1)

7.Define NWC. How is it calculated? (1)

8.How can maximization of shareholders wealth be achieved as an objective of

financial management? (1)

9.„Moms Magic‟, a biscuit manufacturing company, launched biscuits with

different flavours based on quality and features like „Crunchy biscuits‟, „Sweet Potato‟, „Coffee” ,”Jolly‟ etc.The labels on the package of the biscuits are with

pictures and different colours indicating and specifying the flavours of the

biscuits and their contents.Identify and explain the two functions of labelling discussed.

(3)

10.What do the marketing slogans “Caveat emptor” and “Caveat venditor”mean?

List 4 parties who can file a complaint before a consumer forum?

(1+2=3)

11.Aditi set-up a company „Dantik Ltd.‟ to manufacture toothpastes using herbs

found in her village instead of chemicals that are hazardous to health. The

package of the product was eco-friendly and had details like price, quantity, ingredients, directions for use and other relevant information. It also carries the

contact details like address,phone number and e-mail id of „Dantik Consumer

Services and Grievance Cell‟.Detailed directions and precautions to use the paste were also specified on the label for the safety of children. The toothpaste

became very popular and she started getting orders from reputed traders.

Identify and explain any 3 Rights of Consumers discussed above.(3)

12.Name the aspect of financial management that provides a link between

investment and financing decisions.Explain the twin objectives of this concept.

(1+2=3)

13.Shalini, after acquiring a degree in Hotel Management and Business

Administation took over her family food processing company of manufacturing pickles, jams and squashes. The business was established by her great

grandmother and was doing reasonably well. However the fixed operating costs

of the business were high and the cash flow position was weak. She wanted to undertake modernisation of the existing business to introduce the latest

manufacturing processes and diversify into the market of chocolates and

candies. She was very enthusiastic and approached a finance consultant, who told her that approximately Rs.50 lakh would be required for undertaking the

modernization and expansion programme. He also informed her that the stock

market was going through a bullish phase. (a) Keeping the above considerations in mind, name the source of finance

Shalini should not choose for financing the modernization and expansion of her

food processing business. Give one reason in support of your answer.

(b) Explain any two other factors, apart from those stated in the above situation, which she should keep in mind while taking this decision.(1+2=3)

14.Explain any 4 methods of floating new issues in the primary market.(4)

15.Arman a degree holder in Entrepreneurship came to know about Pulanpur

village located in Rajasthan, where in 2016 an initiative was started, in which 111 trees are planted every time a girl child is born.To keep termites away from

the trees the villagers have planted 2.5 million Aloe Vera plants around the

trees. This

has turned the village into an oasis,as the planting of trees led to higher water

levels.Aman decided to visit the village to start a business unit, for the

processing and marketing of Aloe Vera into juices, gels,lotions and other products.However, on visiting the village Arman found that the villagers were

suffering exploitation at the hands of local merchants who were engaged in

nscrupulous, exploitative trade practices like hoarding and black marketing of food productsand also selling unsafe, adulterated products to the villagers.After

looking at their plight instead of a business organisation he decided to set up an

organization-“Jai-Pulan” for the protection and promotion of the consumer interest of the villagers.State 8 functions that this organisation will be

performing.

(4)

16.Explain capital budgeting decisions with an eg. Describe the factors affecting

these. (1+3=4)

17.Sahiba Ltd. is a large credit worthy, export oriented company operating in

the Kashmir Valley,dealing in exclusive embroidered shawls. The floods in the

Valley have created many problems for the company. Many craftsmen and workers have been dislocated and raw material has been destroyed. The firm is

therefore, unable to get an uninterrupted supply of raw material, and the

duration of the production cycle has also increased. To add to the problems of the organisation, the suppliers of raw material who were earlier selling on credit

are asking the company, for advance payment or cash payment on delivery. The

company is facing a liquidity crisis. The CEO of the company feels that taking a bank loan is the only option with the company to meet its short term shortage of

cash.As a finance manager of the company

a.) Name and explain the alternative to bank borrowing that the company can

use to resolve the crisis. b.) State & explain any other purpose of this instrument. (2+2=4)

18. Sumit purchased an ISI marked washing machine of a famous brand „MG‟ from TG Electronics Ltd. The shopkeeper asked him to wait for two days for

installation of the machine. His friend, Vivek, was very fond of experimenting

with new electronic products. He told Sumit that there is noneed to wait for the company‟s representative to install the machine and that he could do it. So,

both of them installed the machine without following the manufacturer‟s

instructions. Initially, the machine worked effectively and the wash was good.But after two days, the machine stared stopping in between the wash

cycle. Sumit and Vivek tried their best to start the machine but failed in their

efforts. Sumit, therefore, approached TG Electronics Ltd., which refused to provide any service on the plea that the installation of the machine was not

done by the company.

(a) State the responsibility which Sumit had to fulfil as an aware consumer to

get the services of the company. (b)State any 3 reliefs Sumit could have availed provided his grievance was a

genuine one. (1+3=4)

19.“Every time I travelled, people asked me to bring them chips, khakra and

pickles from all over the country,” says Anoushka. Finally, she and her

colleague, Sumeet, decided to make a business out of it. They launched a

facebook page, asked people what they wanted, and they came up with a list of about 100 places and tied up with two dozen vendors to begin with.They were

servicing people from Jaipur who wanted spices from Kerala,people from

Panipat who wanted halwa from Jammu and people from Delhi who ordered for fresh tea leaves from Darjeeling. Through their business they wished to bridge

the gap between sellers and buyers. The business is now worth millions.Explain

any two important

activities that Anoushka and Sumeet will have to be involved in for making the

goods available to the customers at the right place, in the right quantity and at the right time.(4)

21. „Samudra Ltd.‟ is a company manufacturing cotton yarn. It has been consistently earning good profits for many years. This year too, it has been able

to generate enough profits. There is availability of enough cash in the company

and good prospects for growth in future. It has many shareholders who prefer to receive a regular income from their investments.It has taken a loan of 80 lakhs

from IDBI and is bound by certain restrictions on the payment of dividend

according to the terms of loan agreement.The above discussion above the

company leads to various factors which decide how much of the profits should be retained an how much has to be distributed by the company.Identify and

explain any 5 such factors. (5)

22.a.)State the regulatory body set up by Govt of India to wipe out the unfair

trading practices in the securities market.

b.)Mention any 3 of its functions under each of the 3 categories. (½+4½=5)

23.Varsha was a Commerce student of class XII. Her father was a farmer,who

grew different varieties of fruits and was well versed about various aspects of

fruit cultivation.He developed appropriate plans to achieve his marketing goals and was also selected by the government for a pilot-project on fruit cultivation.

As a project she decided to study the feasibility of marketing good quality fruits

at reasonable price. Her father suggested to her to use internet to gather customers‟ views and opinions. She found that there was a huge demand for

organic-packed fruits. She knew that there were no pre-determined

specifications in case of fruits, because of which it would be difficult to achieve

uniformity in the output. To differentiate the product from its competitors, she gave it the name of “Farm fresh” and classified it into three different varieties

namely — Agro, Naturo and Oregano, based on the quality.They also ensured

that their produces reached all parts of the nation by overcoming time gaps, problems of irregular demand & supply etc.Together they also created their own

website-“Farm Fresh” to conduct customer surveys, opinions, exchange

information and handle queries & complaints. Explain the functions of marketing, with reference to the above case.(6)

24.Shreya was pursuing her graduation.Everyday she saw her mother working tirelessly at home after coming back from her work-place.She decided to start a

catering cum tiffin service to increase her family income.To begin with she

started supplying tiffin only in the neighbourhood. Everyday she detailed out

the menu after consulting her mother.For informing the people about her service, she designed and printed a beautiful informative pamphlet, and

distributed it alongwith daily newspapers. She also appointed two freshly

graduated boys to deliver tiffins on a door to door basis.The business was slow to begin with but picked-up well afterwards.She received instant encouraging

responses and feedbacks for menu improvement as well.She was able to earn a

profit of 20% of the revenue in the first month.

(a) Identify and explain the promotional tool used by Shreya to communicate to

the customers about her tiffin service. (b) Describe any three roles of the promotional tool identified above.

(c)Explain 2 merits of this tool as well. (1+3+2=6)

25.Describe the important functions of a Stock Exchange. (6)

INDIAN COMMUNITY (SENIOR) SCHOOL,KUWAIT

XII - BUSINESS STUDIES MARKS-80

SECOND TERM EXAMINATION , 2018 TIME-3 HRS

ANSWER KEY

1.Availability of raw materials/ Production Cycle/ Nature of business.(1)

2.Societal marketing concept.(1)

3. DSCR is a better ratio affecting the choice of an optimal capital structure

because it covers the deficiencies of ICR and considers preference dividend and

repayment obligations as well. (1)

4. The investor could not invest in the Treasury Bills as they can be issued for a

minimum amount of ₹25,000 and its multiples thereof.(1)

5.Kalpana have obtained a cash memo on purchase of the sweets for filing the

claim in the consumer court.(1)

6. Trading on Equity refers to the increase in profit earned by the equity shareholders due to the presence of fixed financial charges like interest.

Companies often employ more of cheaper debt to enhance the EPS and this practice is called Trading on Equity. (1)

7. Net working capital may be defined as the excess of current assets over

current liabilities. NWC = CA – CL i.e.Current Assets - Current Liabilities. (1)

8. Maximization of shareholders wealth can be achieved as an objective of

financial management if market price of equity share increase (if the benefits from a decision exceeds the cost involved) and such value additions tend to

increase the market price of shares. (1) 9. Functions of labelling discussed above are:

(i) Describes the product and specifies its contents. (ii) Helps in grading of products.(Both to be stated & explained) (1.5+1.5=3)

10. The earlier approach of caveat emptor, which meant “Let the buyer beware”,

has now been changed to caveat venditor (“Let the seller beware”). A complaint before the appropriate consumer forum

can be made by: (i) Any consumer;

(ii) Any registered consumers‟association; (iii) The Central Government or any State Government;

(iv) One or more consumers, on behalf of numerous consumers having the

same interest; and (v) A legal heir or representative of a deceased consumer.(1+2=3)

11. Rights of Consumers discussed above:

(i)Right to be Informed states that a consumer has a right to have complete information about the product he intends to buy such as ingredients, date of

manufacture, price, quantity etc. (ii)Right to be Heard states that a consumer has right to file a complaint and

to be heard in case of dissatisfaction with a product or a service. (iii)Right to safety states that the consumer has a right to be protected against goods and services, to conform to the safety norms and not cause any damage

or injury . (3*1=3)

12.Financial Planning(1+2=3) Financial planning strives to achieve the following twin objectives.

(a)To ensure availability of funds whenever these are required- A proper estimation of the funds required for different purposes is to be made alongwith

estimating the time at which these funds are to be made available and to specify possible sources of these funds.

(b) To see that the firm does not raise resources unnecessarily – good financial planning would put the surplus funds to the best possible use so that

the financial resources are not left idle and don‟t unnecessarily add to the cost.

13.a. Shalini must not opt for debt financing as the fixed operating costs of the business were high and the cash flow position was weak and the stock market

was going through a bullish phase. b.2 other factors, apart from those stated in the above situation, which she

should keep in mind while taking this decision are as follows: (a) Cost:The cost of raising funds through different sources are different. A

prudent financial manager would normally opt for a source which is the cheapest.

(b) Risk: The risk associated with different sources is different. (c) Floatation Costs: Higher the floatation cost, less attractive the source.

(d)State of Capital Markets:Health of the capital market may also affect the choice of source of fund. (1+2=3)

14. Various methods of floating new issues in the primary market (any 4) 1. Offer through Prospectus: Offer through prospectus is the most popular

method of raising funds by public companies in the primary market. This involves inviting subscription from the public through issue of prospectus. A

prospectus makes a direct appeal to investors to raise capital. The contents of the prospectus have to be in accordance with the provisions of the Companies

Act and SEBI disclosure and investor protection guidelines. 2. Offer for Sale: Under this method securities are not issued directly to the

public but are offered for sale through intermediaries like issuing houses or

stock brokers. In this case, a company sells securities enbloc at an agreed price

to brokers who, in turn, resell them to the investing public. 3. Private Placement: Private placement is the allotment of securities by a

company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue. Some companies, therefore,

cannot afford a public issue and choose to use private placement. 4. Rights Issue: This is a privilege given to existing shareholders to subscribe

to a new issue of shares according to the terms and conditions of the company.The shareholders are offered the „right‟ to buy new shares in

proportion to the number of shares they already possess. 5. e-IPOs: A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock

exchange called an Initial Public Offer .SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the

company. The issuer company should also appoint aregistrar to the issue having electronic connectivity with the exchange. The issuer company can

apply for listing of its securities on any exchange other than the exchange through which it has offered its securities. (4*1=4)

15.Role of NGOs(8*1/2=4)

(i) Educating the general public about consumer rights by organising training programmes,seminars and workshops.

(ii) Publishing periodicals and other publications to impart knowledge about consumer problems, legal reporting, reliefs available and other matters of

interest. (iii) Carrying out comparative testing of consumer products in accredited

laboratories to test relative qualities of competing brands and publishing the test results for the benefit of consumers.

(iv) Encouraging consumers to strongly protest and take an action against unscrupulous,exploitative and unfair trade practices of sellers. (v) Providing legal assistance to consumers by way of providing aid, legal advice

etc. in seeking legal remedy. (vi) Filing complaints in appropriate consumer courts on behalf of the

consumers. (vii) Taking an initiative in filing cases in consumer courts in the interest of the

general public, not for any individual. (viii) Protection and promotion of consumers‟ interests,welfare and wellbeing.

16. A long-term investment decision is called a Capital Budgeting decision. It

involves committing the finance on a long-term basis. For example, making investment in a new machine to replace an existing one or acquiring a new

fixed asset oropening a new branch etc. (a) Cash flows of the project:When a company takes an investment decision

involving huge amount it expects to generate some cash flows over a period.These cash flows are in the form of a series of cash receipts and

payments over the life of an investment.The amount of these cash flows should

be carefully analysed before considering a capital budgeting decision. (b) The rate of return: The most important criterion is the rate of return of the

project.These calculations are based on theexpected returns from each proposal and the assessment of risk involved.

(c) The investment criteria involved:The decision to invest in a particular project involves a number of calculations regardingthe amount of investment, interest

rate, cash flows and rate of return.There are different techniques to evaluate investment proposals known as capital budgeting techniques.(1+3=4)

17.a.The issuance of commercial paper is an alternative to bank borrowing for

large companies that are generally considered to be financially strong. Commercial paper is a short-term unsecured promissory note, negotiable and

transferable by endorsement and delivery with a fixed maturity period. It is issued by large and creditworthy companies to raise short-term funds at lower rates of interest than market rates.It usually has a maturity period of 15 days

to one year. b. Funds raised through commercial paper are used to meet the floatation costs

(costs associated with floating of an issue are brokerage, commission,printing of applications and advertising etc.). This is known as Bridge Financing.(2+2=4)

18. (a) Responsibility which Sumit has to fulfill as an aware consumer to get the

services of the company: Learn about the risks associated with products and services,follow

manufacturer‟s instructions and use the products safely. (b)Reliefs that could have been availed:

(i) To remove the defect in goods or deficiency in service. (ii) To replace the defective product with a new one, free from any defect.

(iii) To refund the price paid for the product, or the charges paid for the service. (iv) To pay a reasonable amount of compensation for any loss or injury suffered

by the consumer due to the negligence of theopposite party. (v) To pay punitive damages in appropriate circumstances. (1+3=4)

19.Any 2 activities of place/physical distribution: (4*1=4)

1. Order Processing: In a buyer -seller relationship orderplacement is the first

step. Productsflow from manufacturers to customersvia channel members while orders flowin the reverse direction, fromcustomers to the manufacturers. Agood physical distribution systemshould provide for an accurate andspeedy

processing of orders, in theabsence of which goods would reachthe customers late or in wrong quantity specifications.

2. Transportation: Transportation is the means of carrying goods and raw materials from the point of production to the point of sale. It is one of the major

elements in the physical distribution of goods. It is important because unless the goods are physically made available, the sale cannot be completed.

3. Warehousing: Warehousing refers to the act of storing and assorting products in order to create time utility in them.The basic purpose of

warehousing activities is to arrange placement of goods and provide facilities to

store them.The need for warehousing arises because there may be difference between the time a product is produced and the time it is required for

consumption.The firm has to strike a balance between the cost of warehousing and the level of customer service.

4.Inventory Control :A very important decision in respect of inventory is deciding about the level of inventory.Higher the level of inventory,higher will be

the level of service to customers but the cost of carrying the inventory will also be high because lot of capital would be tied up in the stock.Thus, a balance is

to be maintained in respect of the cost and customer satisfaction.With advancements in computers and information technology the need for keeping higher inventory is reducing.

20.Factors Affecting Dividend Decisions(any 5) (5*1=5)

(a) Earnings: Dividends are paid out of current and past earnings.Therefore, earnings is a majordeterminant of the decision aboutdividend.

(b) Stability of Earnings: A companyhaving stable earning is in aposition to declare higherdividends. As against this, acompany having unstable earningsis

likely to pay smaller dividend. (c) Stability of Dividends: It has beenfound that the companies generallyfollow a

policy of stabilizing dividend per share. The increasein dividends is generally madewhen there is confidence that theirearning potential has gone up andnot

just the earnings of the currentyear. (d) Growth Opportunities:Companieshaving good growth opportunitiesretain

more money out of theirearnings so as to finance therequired investment. The dividendin growth companies is, therefore,smaller, than that in the non–growth

companies. (e) Cash Flow Position: Dividendsinvolve an outflow of cash. Acompany may be

profitable butshort on cash. Availability ofenough cash in the company is necessary for declaration ofdividend by it.

(f) Shareholders Preference: Whiledeclaring dividends, managementsusually keep in mind thepreferences of the shareholders inthis regard. If the

shareholders ingeneral desire that at least a certainamount is paid as dividend, thecompanies are likely to declare the same. There are always some

shareholders who depend upon aregular income from theirinvestments. (g) Taxation Policy:The choice betweenpayment of dividends and retainingthe

earnings is, to some extent,affected by difference in the taxtreatment of dividends and capitalgains. If tax on dividend is higherit would be better to pay

less byway of dividends. Higher dividends may bedeclared if tax rates are relativelylower. Though the dividends are freeof tax in the hands of

shareholdersa dividend distribution tax is leviedon companies. Stock Market Reaction: Investors,in general, view an increase in dividend as a

good news and stock prices react positively to it.Similarly, a decrease in dividend may have a negative impact on the share prices in the stock market.

(i) Access to Capital Market:Large and reputed companies generally have easy

access to the capital market and therefore may depend less on retained earning to finance their growth. These companies tend to pay higher dividends than the

smaller companies which have relatively low access to the market. (j) Legal Constraints:Certain provisions of the Company‟s Act place restrictions

on payouts as dividend. Such provisions must be adhered to while declaring the dividends.

(k) Contractual Constraints: While granting loans to a company,sometimes the lender may impose certain restrictions on the payment of dividends in future.

The companies are required to ensure that the dividends does not violate the terms of the loan agreement.

22.a.) SEBI b.)Functions of SEBI(Any 3 under each )(½+4.5=5)

Regulatory Functions 1. Registration of brokers and subbrokers and other players in the market.

2. Registration of collective investment schemes and Mutual Funds. 3. Regulation of Stock Bankers and portfolio exchanges, and merchant bankers.

4. Prohibition of fraudulent and unfair trade practices. 5. Controlling insider trading and takeover bids and imposing penalties for

such practices. 6. Calling for information by undertaking inspection, conducting enquiries and

audits of stock exchanges and intermediaries. 7. Levying fee or other charges for carrying out the purposes of the Act.

8. Performing and exercising such power under Securities Contracts (Regulation) Act 1956, as may be delegated by the Government of India.

Development Functions 1. Investor education

2. Training of intermediaries 3. Promotion of fair practices and code of conduct of all SRO‟s.

4. Conducting research and publishing information useful to all market participants.

Protective Functions 1.Prohibition of fraudulent and unfair trade practices like price rigging,

manipulations etc. 2.Controlling insider trading and imposing penalties for these. 3.Undertaking steps for investor protection

4.Promotion of fair practices and code of conduct in securities market.

23. The following functions of marketing to be identified and explained: a.Gathering& analyzing market information

b.Branding c.Standardisation

d.Grading e.Transportation,storage& warehousing

f.Customer support services. (6*1=6)

24.a.Personal selling involves oral presentation of message in the form of conversation with one or more prospective customers for the purpose of making

sales. It is a personal form of communication in whichsalespersons contact prospective buyers and create awareness aboutthe product and develop

productpreferences with the aim of making sales.

b.Role Of Personal Selling (any 3 of the following) Importance to Businessmen- Effective Promotional Tool, Flexible Tool,

Minimises Wastage of Efforts, Consumer Attention, Lasting Relationship, Personal Rapport, Role in Introduction Stage. Importance to Customers-Help in Identifying Needs, Latest Market

Information, Expert Advice, Induces Customers. Importance to Society-Converts Latest Demand, Employment Opportunities,

Career Opportunities, Mobility of Sales People, Product Standardisation.

c.Merits of Personal Selling(any 2) (i) Flexibility:There is lot of flexibility in personal selling. The sales presentation

can be adjusted to fit the specific needs of the individual customers. (ii) Direct Feedback:As there is direct face-to-face communication in personal

selling, it is possible to take a direct feed back from the customer and to adapt the presentation according to the needs.

(iii) Minimum Wastage:The wastage of efforts in personal selling can be minimised as company can decide the target customers before making any

contact with them. (1+3+2=6)

25.Functions of Stock Exchange (6*1=6) 1. Providing Liquidity and Marketability to Existing Securities:The basic

function of a stock exchange is the creation of a continuous market where securities are bought and sold. It gives investors the chance to disinvest and

reinvest. This provides both liquidity and easy marketability to already existing securities in the market.

2. Pricing of Securities:Share prices on a stock exchange are determined by the forces of demand and supply. A stock exchange is a mechanism of constant

valuation through which the prices of securities are determined.Such a valuation provides important

instant information to both buyers and sellers in the market. 3. Safety of Transaction: The membership of a stock exchange is well

regulated and its dealings are well defined according to the existing legal framework.This ensures that the investing public gets a safe and fair deal on the market.

4. Contributes to Economic Growth:A stock exchange is a market in which existing securities are resold or traded.Through this process of disinvestment

and reinvestment savings get channelised into their most productive investment avenues. This leads to capital formation and economic growth.

5. Spreading of Equity Cult: The stock exchange can play a vital role in

ensuring wider share ownership by regulating new issues, better trading practices and taking effective steps in educating the public about investments.

6. Providing Scope for Speculation:The stock exchange provides sufficient scope within the provisions of law for speculative activity in a restricted and

controlled manner. It is generally accepted that a certain degree of healthy speculation is necessary to ensure liquidity and price continuity in the stock

market.