Question

    A company may raise funds from various sources as

    equity. Which of the following funds raised by a company would be classified as Quasi Equity and not pure equity?  
    A Unsecured loans from friends and relatives Correct Answer Incorrect Answer
    B Unpaid share capital Correct Answer Incorrect Answer
    C Capital reserve Correct Answer Incorrect Answer
    D All of the above Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Quasi-equity is a hybrid form of finance with characteristics of both  debt  and equity investments. Quasi-equity offers non-dilutive equity risk capital that is paid back based on the performance of the company.    Quasi-equity financing  would include either being an unsecured loan or being a flexible loan repayment schedule. Mezzanine debt and junior debt are examples of quasi-equity financing as they are both usually unsecured and flexible when it comes to the repayment schedule of the loan.  

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