Recently when Mosaic Ltd was falling short of funds to meet the floatation costs of its upcoming issue of preference shares, the company raised deposits from Rosaic Ltd. Which had surplus funds. In the context of the above case: Identify and explain the source of finance being discussed above

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29-09-2020
Business

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Recently when Mosaic Ltd was falling short of funds to meet the floatation costs of its upcoming issue of preference shares, the company raised deposits from Rosaic Ltd. Which had surplus funds. In the context of the above case: Identify and explain the source of finance being discussed above

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AbsorbingMan AbsorbingMan · Answer 1 · 2020-09-30T08:53:36+02:00

Answer:

The floatation cost may be defined as the cost that is incurred or earned by any organization or a firm whenever they issue new stocks in the market. Here in the context, Mosaic Ltd is having shortage of money to incur the cost of the upcoming preference shares that they will issue. So they had raised deposits from another firm, Rosaic Ltd which had a surplus amount of fund. The money raised by Mosaic is a kind of security bond or transfer of money to another party for the safe keeping. The other firm i.e Mosaic Ltd. will return the money to Rosaic Ltd. later.