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

Time barred debt can be claimed as

  1. set off

  2. counterclaim

  3. afresh suit

  4. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If any debt is barred by time, that means it is barred by law. It cannot be claimed by the way of instituion of suit. Time barred debt does not mean that the debt does not exist.

Multiple choice

Garnishee means

  1. Judgement Debtor

  2. Judgement Creditor

  3. Judgement Debtor’s Debtor

  4. Guarantor
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Garnishee means a judgment debtor’s debtor. He is a person or institution that is indebted to another whose property has been subject to garnishment. 

Multiple choice

Consideration for lease is

  1. license

  2. price

  3. debt

  4. premium
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A lease of immovable property is a transfer of a right to enjoy such property made for a certain time, express or implied or in perpetuity, in consideration of a price paid or promised or of money, a share of crops, service or any other thing of value.

Multiple choice

They called at us yesterday to discuss cash credit account.

  1. They called at us yesterday to discuss cash credit account.

  2. Yesterday, they called at us to discuss cash credit account.

  3. To discuss cash credit account they called at us.

  4. They called on us yesterday to discuss cash credit account.

  5. We ever called at yesterday by them to discuss cash credit account.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

‘called at’ is used for a place and called on’ (or) called upon is used for person hence option a b, c and e are all incorrect, option (D) is the answer. 

Multiple choice

Mortgage is a

  1. security on movable property for a loan given by a bank

  2. security on immovable property for a loan given by a bank

  3. concession on immovable property for a loan given by a bank

  4. facility on immovable property for a loan given by a bank

  5. security on immovable property for a deposit received by a bank

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A mortgage is a security interest on immovable property (like land or house) created for a loan given by a bank. The property serves as collateral for the loan. Movable property security is called hypothecation, not mortgage. A concession is not relevant, and mortgage is specifically for loans, not deposits.

Multiple choice

Directions: Choose the correct option for the given question.

Consider the following statements: Current ratio is increased by

  1. Issue of redeemable preference shares.
  2. Selling of old furniture for cash.
  3. Cash realized from debtors. Which of the statements given above are correct?

  1. (1) and (2) only

  2. (2) and (3) only

  3. (1) and (3) only

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Issuing redeemable preference shares increases cash (current asset) without affecting current liabilities, improving the ratio. Selling furniture for cash similarly increases current assets. Cash from debtors merely replaces one current asset (receivables) with another (cash), leaving the ratio unchanged.

Multiple choice

Directions: Choose the correct option for the given question.

Under the heading 'Secured Loans', the following are disclosed

  1. Loans and Advances from banks.
  2. Debentures.
  3. Loans and Advances from subsidiaries.
  4. Other loans and advances. What is the correct chronological order of disclosure of the items given above in balance sheet of a company?

  1. 3 - 1 - 2 - 4

  2. 2 - 4 - 3 - 1

  3. 3 - 4 - 2 - 1

  4. 2 - 1 - 3 - 4
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under 'Secured Loans' in the balance sheet, debentures (being long-term secured instruments) are disclosed first, followed by loans from banks (secured against assets). Loans from subsidiaries come next, with 'Other loans and advances' disclosed last. This order reflects the typical hierarchy of secured borrowing, from most formal to least formal.

Multiple choice

Directions: Select the right meaning of the underlined word.

Many farmers' debts were written off.

  1. cancelled

  2. written proper documents

  3. defer their payment

  4. collected immediately

  5. stemmed as big
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

'Written off' in financial context means to cancel a debt or acknowledge that it will not be collected, essentially removing it from the records as uncollectible. When farmers' debts are written off, they are forgiven and the farmers are no longer required to repay them. Option B (written proper documents) confuses 'written off' with actually writing something, which is incorrect.

Multiple choice

Directions: Choose the correct option for the given question.

Which is not a short term source of working capital?

  1. Trade credit

  2. Credit papers

  3. Bank credit

  4. Loans

  5. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Short-term working capital sources include Trade credit (buying now, paying later), Credit papers (commercial paper), and Bank credit (short-term loans). Loans typically refer to long-term borrowing, making it the correct answer as NOT a short-term source.

Multiple choice

Directions: The sentence below or part thereof has been underlined. The underlined part may have an error of grammar or diction. Select the option that best corrects the error, if any.

Unlike a typical automobile loan which requires a fifteen to twenty % down payment, the lease loan buyer is not required to make an initial deposit on the new vehicle.

  1. the lease-loan buyer is not required to make

  2. with lease-loan buying there is no requirement of

  3. lease-loan buyers are not required to make

  4. a lease-loan does not require the buyer to make

  5. The lease loan buyer's are not required to make
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The first part of the sentence is making a comparison between the down payment system in two different types of loans, from all the options present only the (D) option recognizes the lease loan as a loan, so (D) is the correct answer.

Multiple choice

The process of deplation tends to favour

  1. debtor and creditiors a like

  2. debtor at the expense of creditors

  3. creditors at the expense of debtors

  4. profit receivers at the expense of fixed income receivers
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

During deflation, the price level falls, meaning money gains purchasing power. Creditors benefit because they are repaid in money that is worth more than when it was lent. Debtors suffer because they must repay loans with money that has increased in value.

Multiple choice

The asset which is first in liquidity is

  1. bills receivable

  2. land and building

  3. cash at bank

  4. cash in hand
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 Cash in hand is the most liquid asset, since we can take out cash from the business very quickly, whenever required.