Sakshi Ltd. is a company manufacturing electronic goods. It has a share capital of Rs. 120 lakhs. The earning per share in the previous years was Rs 0.5. For diversification, the company requires additional capital of Rs 80 lakhs. The company raised funds by issuing 10% debentures for the same. During the current year, the company earned a profit of Rs. 16 lakhs on capital employed. It paid a tax of 40 %. (a) State whether the shareholders gained or lost in respect of earning per share on diversification. Show your calculations clearly. (b) Also, state any three factors that favour the issue of debentures by the company as part of its capital structure.

Sakshi Ltd. is a company manufacturing electronic goods. It has a shar

1.	Sakshi Ltd. is a company manufacturing electronic goods. It has a share capital of Rs. 120 lakhs. The earning per share in the previous years was Rs 0.5. For diversification, the company requires additional capital of Rs 80 lakhs. The company raised funds by issuing 10% debentures for the same. During the current year, the company earned a profit of Rs. 16 lakhs on capital employed. It paid a tax of 40 %. (a) State whether the shareholders gained or lost in respect of earning per share on diversification. Show your calculations clearly. (b) Also, state any three factors that favour the issue of debentures by the company as part of its capital structure.
Answer» Sakshi Ltd. is a company manufacturing electronic goods. It has a share capital of Rs. 120 lakhs. The earning per share in the previous years was Rs 0.5. For diversification, the company requires additional capital of Rs 80 lakhs. The company raised funds by issuing 10% debentures for the same. During the current year, the company earned a profit of Rs. 16 lakhs on capital employed. It paid a tax of 40 $%$ . (a) State whether the shareholders gained or lost in respect of earning per share on diversification. Show your calculations clearly. (b) Also, state any three factors that favour the issue of debentures by the company as part of its capital structure.

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