Banking Financial Awareness · Commerce Accountancy

Credit, Debt, and Finance

1,435 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

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 is the cash receipt from financing activity?

  1. Cash received from issue of debentures

  2. Cash received from sale of goods

  3. Cash received from debtors

  4. Cash receipt from disposal of fixed assets
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

It is an item of financing activity. By issuing of debentures, we get finance for our business from the debenture holders in the form of borrowings or loan.

Multiple choice

Which of the following is/are borrowed source of funds?

  1. Retained earnings

  2. Debentures

  3. Fixed deposit in bank

  4. Credit balance in Profit and Loss account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Debentures are borrowed source of funds. Debentures acknowledge that the debt is owned to the company or the loan is given to the company. The debenture holders are the creditors of the company, i.e. outside party. Debenture indicates that the money is borrowed from the debenture holders.

Multiple choice

The payment of negotiable instrument becomes due

  1. at maturity

  2. before maturity

  3. on third day of maturity under the grace period

  4. after maturity
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The maturity of a promissory note or bill of exchange is the date at which it falls due. Days of grace— every promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on presentment is at maturity on the third day after the day on which it is expressed to be payable.