Final answer:
Interest on advance given to a firm is considered a charge, reflecting the cost of borrowing. In the financial market, a rise in supply would lead to a decline in interest rates, while an increase in demand or supply would lead to more loans being made. The correct answer is option (c).
Step-by-step explanation:
The interest on advance given to a firm is (c) a charge. In accounting terms, this interest is considered an expense for the firm because it represents the cost of borrowing capital. It is not seen as an appropriation, which is typically a division of profits among partners or shareholders, nor is it viewed as a gain, since it does not increase the firm's equity or assets.
In the financial market, which can affect the interest rates, certain dynamics can cause rates to fluctuate. A decline in interest rates is usually a result of a rise in supply of capital in the market (option c). This could happen if there are more savings available for lending or if the central bank injects more money into the economy.
Firms looking to access financial capital are faced with options like borrowing from a bank, issuing bonds, or issuing stock. Borrowing money allows a firm to maintain control but requires adhering to scheduled interest payments. Conversely, issuing stock does not involve regular interest payments but dilutes ownership and control of the company.
An increase in the quantity of loans made and received in the financial market is typically influenced by a rise in demand for loans (option a) or a rise in supply of funds available to lend (option c). Both scenarios facilitate more lending activity in the market.