Banking Financial Awareness · Commerce Accountancy

Credit, Debt, and Finance

1,382 Questions

This topic covers essential concepts of credit, debt, and finance including bankruptcy, debt recovery, and financial acts. These questions are frequently asked in banking and IBPS exams. Test your knowledge of financial terminology and loan classifications.

Debt recovery actsBankruptcy filing proceduresFinancial classificationsMedium term financeCredit loss management

Credit, Debt, and Finance Questions

Multiple choice

Bank rate is the interest rate, charged on which of the following?

  1. Loans taken by banks from banks

  2. Loans taken by banks under bills re-discounting

  3. Loans taken on gold

  4. Loans taken by banks under bill discounting

  5. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Yes, it is correct choice. Bank rate  is the interest rate is charged on Loans taken by banks under bills re-discounting.

Multiple choice

What is holding period?

  1. Holding period is the period in which creditor will take the right on the assets of debtor.

  2. Holding period is the period in which customer will keep default stock before returning it to its supplier.

  3. Holding period is the period in which banker will keep the fund of customer before withdrawing by him.

  4. Holding period is the period in which investor will keep his investment.

  5. All the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Holding period is the period in which investor will keep his investment. Investment may be in stock, debentures or any other assets. Investor can invest his money for short period or long period. So, holding period may also be short period or long period. In a long position, holding period refers to the time between an asset's purchase and its sale. In a short sale, the holding period is the time between when a short seller initially borrows an asset from a brokerage and when he or she sells it back - in other words, the length of time for which the short position is held.

Multiple choice

In case of dishonour of bills receivable what effect will it have on current ratio?

  1. Decrease in current asset and increase in current liability with same amount.

  2. Nil effect.

  3. Increase in current assets and increase in current liability with same amount.

  4. Decrease in current assets and decrease in current liability.

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

There will be no effect on current assets and current liabilities. So the effect will be nil. 

Multiple choice

Payment received from Debtor _________________.

  1. decreases the Total Assets

  2. increases the Total Assets

  3. results in no change in the Total Assets

  4. increases the Total Liabilities

  5. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Payments received from debtors results in decrease of debtors and increase in cash. It does not result in any change in the total assets as decrease in one asset is compensated by increase in the other asset.

Multiple choice

Which of the following defines Current Liabilities?

  1. Debts repayable after 1 year

  2. Debts need not be repaid

  3. Debts written off

  4. Debts repayable within one year

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 Debts must be paid within one  year or one operating cycle.

Multiple choice

What is a call money?

  1. Money borrowed or lent for a day or overnight.

  2. Money borrowed or lent for more than one, but less than 15 days.

  3. Money borrowed or lent for more than 15 days.

  4. Money borrowed for more than one day, but up to 14 days.

  5. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Call money is a money borrowed or lent for a day or overnight.

Multiple choice

A letter of credit means:

  1. A bank agreeing to accept and pay on due date

  2. A letter containing conditions of credit purchase or sale

  3. A letter sent by exporter to importer sanctioning credit deal

  4. A letter sent by importer to exporter sanctioning credit deal
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A letter of credit is a bank's commitment to pay the exporter on behalf of the importer, ensuring payment security in international trade. The bank guarantees payment upon presentation of compliant documents, reducing risk for exporters.

Multiple choice

Which of the following is an efficiency ratio?

  1. Price-Earning Ratio

  2. Debt-Equity Ratio

  3. Acid-Test Ratio

  4. Average collection period
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Efficiency ratios measure how effectively a company uses its assets and manages its operations. Average collection period (accounts receivable days) measures how quickly customers pay - an important efficiency metric. P/E ratio is valuation, Debt-Equity is solvency/leverage, and Acid-Test is liquidity - none are efficiency ratios.

Multiple choice

Which of the following presumptions regarding negotiable instruments is not correct?

  1. Every negotiable instrument bearing a date was made or drawn on such date.

  2. Every transfer of a negotiable instrument was made before its maturity.

  3. A lost promissory note, bill of exchange or cheque was not duly stamped.

  4. Every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Presumptions regarding negotiable instruments are a lost promissory note, bill of exchange or cheque was duly stamped.