Which of the following is NOT the primary consideration for defining the capital of a company for purposes of measuring capital adequacy?
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A. B. C. D.C
The primary consideration for defining the capital of a company for the purposes of measuring capital adequacy is an important concept in banking and financial regulation. Capital adequacy refers to the ability of a financial institution to absorb potential losses from its operations, and it is an important aspect of ensuring the safety and soundness of the financial system.
Capital of a company generally refers to the financial resources that a company has at its disposal to meet its obligations, including its debts and other financial commitments. The primary consideration for defining the capital of a company for the purposes of measuring capital adequacy is the permanence of the capital. This means that the capital should be of a permanent nature and not subject to withdrawal or redemption by the owners of the company.
The other options listed in the question - freedom from mandatory fixed charges, debtors of the business, and creditors of the business - are also important considerations when defining the capital of a company, but they are not the primary consideration.
Freedom from mandatory fixed charges refers to the ability of a company to use its capital for its own purposes without being obligated to make fixed payments or repayments to creditors. This is important because if a significant portion of a company's capital is tied up in mandatory fixed charges, it may not be available to absorb losses in the event of adverse developments.
Debtors of the business refer to the individuals or entities that owe money to the company. Debtors represent a potential source of future income for the company, but they are not considered part of the company's capital.
Creditors of the business refer to the individuals or entities to whom the company owes money. Creditors are an important consideration when defining the capital of a company because they represent a potential drain on the company's financial resources. However, they are not considered part of the company's capital.
Therefore, the answer to the question is option C - Debtors of the business - as it is not the primary consideration for defining the capital of a company for the purposes of measuring capital adequacy.