Question

Explain any two disadvantages of Public deposits.

Answer 1

1. Limited amount: The number of funds that can be raised by public deposits is limited due to regulatory constraints. Public deposits cannot exceed twenty-five percent of share capital and free reserves.
2. Speculation: Companies with unfettered access to public funds may be enticed to raise more capital than they can profitably use. In some circumstances, unused monies may be kept in reserve for unexpected needs. The company's management may indulge in excessive trading and speculating, harming the business.