The correct option is B. authorized capital. Explanation of the Correct Answer Authorized Capital (also known as nominal or registered capital) refers to the maximum amount of share capital that a company is allowed to issue to shareholders as stated in its memorandum of association. This figure is set when the company is incorporated and can only be changed through a formal process, typically requiring shareholder approval and possibly regulatory approval.

1. Definition: Authorized capital is the limit on the amount of capital that a company can raise through the issuance of shares. It represents the total value of shares that the company can issue to shareholders, which is specified in the company's constitutional documents.
2. Importance: This figure is crucial because it provides a framework for the company’s capital structure and ensures that the company does not exceed the amount of capital it is legally allowed to raise. It also gives potential investors an idea of the maximum equity stake they can acquire in the company.
3. Flexibility: While a company can issue shares up to the amount of its authorized capital, it does not have to issue all of it at once. The company can choose to issue shares in tranches as needed, which allows for flexibility in raising funds.

Why the Other Options Are Incorrect

• A. Issued Capital: This refers to the portion of authorized capital that has actually been issued to shareholders. It is the amount of capital that has been offered and sold to investors. Since issued capital can be less than or equal to authorized capital, it does not represent the total amount a company is allowed to raise.
• C. Called-up Capital: This is the part of the issued capital that the company has requested shareholders to pay. Not all issued shares may be called up for payment immediately, so called-up capital is a subset of issued capital. It does not represent the total amount a company can raise.
• D. Paid-up Capital: This is the amount of money that shareholders have actually paid for their shares. It is the portion of called-up capital that has been paid by shareholders. Like called-up capital, paid-up capital is also a subset of issued capital and does not reflect the total amount a company is authorized to raise.

Summary of Key Points

• Authorized Capital is the maximum amount of share capital a company can issue as per its memorandum of association.
• Issued Capital is the portion of authorized capital that has been issued to shareholders.
• Called-up Capital is the part of issued capital that the company has requested payment for.
• Paid-up Capital is the amount that shareholders have actually paid for their shares.

Understanding these terms is essential for grasping how companies manage their capital structure and the implications for investors and stakeholders.