Advertisements
Advertisements
Question
Briefly explain any three demerits of public deposits.
Solution
The demerits of Public deposits are :
Uncertainty: Public deposits is an uncertain and unreliable source of finance. During the depression period, the depositors may not respond. Also, deposits may be withdrawn whenever the financial position of the company is not stable.
Suitable for Short-term Finance: A company cannot depend upon public deposits for a long-term financing requirement as the maturity’ period of public deposits is between six months to three years.
Hindrance to Growth of Capital Market: Public deposits hamper the growth of a healthy capital market in the country. The widespread use of public deposits creates a shortage of industrial securities.
APPEARS IN
RELATED QUESTIONS
What are Public Deposits? Briefly explain any two merits of Public Deposits.
Explain any two advantages of Public deposits.
Explain any two disadvantages of Public deposits.
A company is facing liquidity crunch, hence offers relatively higher interest for upfront borrowing in comparison to commercial banks. Which source of short-term finance would be suitable in the above case?
