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

The debts owing to others by the business is known as

  1. Liabilities

  2. Expenses

  3. Debtors

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

In accounting, liabilities represent debts or obligations that a business owes to external parties like creditors, lenders, or suppliers. Expenses are ongoing costs, debtors are people who owe the business, and assets are resources owned by the business.

Multiple choice

Interest on capital A/c is a

  1. real A/c

  2. personal A/c

  3. nominal A/c

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Nominal A/c is concerned with income and expenses, and interest on capital is an expense because it is to be paid to the partners by the firm.

Multiple choice

Interest on partner's loan is a

  1. charge against profit.

  2. appropriation out of profit

  3. appropriation out of assets

  4. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

It is a charge against profit because it is paid to partner before calculating the profit and has to be paid even if there is a loss.

Multiple choice

What do you mean by Subprime Crisis?

  1. Crisis which arises due to decrease in the number of credit card holders.

  2. Gradual decrease in mortgage delinquencies and foreclosures.

  3. Crisis which arises due to increase in the number of credit card holders.

  4. Gradual increase in mortgage delinquencies and foreclosures.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Subprime Crisis refers to the sharp increase in high-risk mortgage defaults and foreclosures that began in 2007. This led to a global financial collapse as mortgage-backed securities lost value. It was characterized by lending to borrowers with poor credit histories (subprime borrowers).

Multiple choice

Falling prices of property and land, the collateral against which builders borrow to get through the construction period, is going to force many banks to tighten or deny credit this season.

  1. the collateral against which builders borrow to get through the construction period, is

  2. which builders use as collateral to borrow against to get through the construction period, is

  3. the collateral which is borrowed against by builders to get through the construction period, is

  4. which builders use as collateral to borrow against to get through the construction period, are

  5. the collateral against which builders borrow to get through the construction period, are
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

The subject of the sentence is 'Falling prices' - plural, so all options with singular verb 'is' are wrong. Option (4) has a contrived sentence structure. Hence (5).

Multiple choice

Directions: In the question below, a question statement is followed by two arguments numbered I and II. You have to decide which of the given arguments is/are ‘strong'.

Question: Should there be only one rate of interest for term deposits of varying durations in banks? Arguments: I. No, people will refrain from keeping money for longer duration resulting into reduction of liquidity level of banks. II. Yes, this will be much simple for the common people and they may be encouraged to keep more money in banks.

  1. Only argument I is strong.

  2. Only argument II is strong.

  3. Either I or II is strong.

  4. Neither I nor II is strong.

  5. Both I and II are strong.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

I is strong because higher rates attract people to deposit money for longer duration. If there will be only one rate of interest for term deposits for varying durations, this will adversely affect deposit of money in banks for longer duration and also the liquidity levels of banks. II is not strong because only one rate of interest does not encourage people for more savings.

Multiple choice

Judgement debtor means

  1. borrower of a bank

  2. defendant

  3. person against whom a decree is passed

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Option (3) is correct: Judgement debtor means person against whom a decree is passed.

Multiple choice

If a creditor does not file a suit against the buyer for the recovery of price within three years, then the debt becomes

  1. time-barred and hence, irrecoverable

  2. time barred, but recoverable

  3. not time-barred

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

Option (1) is correct: Debt collectors have a limited number of years to collect their debts. They can sue for the debt in that particular time, which is 3 years. After that, debts become time-barred debts and they are irrecoverable.

Multiple choice

Directed credit means

  1. Government directs the channel of flow of funds to identified sectors of the economy

  2. The Board of director issues to directions to the branch managers of the banks to follow a certain credit policy

  3. Credit given in geographical direction to ensure proper flow of funds geographically

  4. Directions given by political leaders to give loans to their close relatives
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Directed credit refers to government policies that require banks to lend a specific portion of their funds to priority sectors, such as agriculture or small-scale industries.

Multiple choice

The capital of IMF is made up by contribution of the

  1. Credit

  2. Deficit financing

  3. Member of countries

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

The IMF's capital is primarily derived from quota subscriptions paid by its member countries, which reflect their relative size in the global economy.

Multiple choice

Subprime crisis is also known as

  1. banks lending below PLR

  2. mortgage crisis

  3. banks lending to VIP customers turning defaulters

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The subprime crisis is widely known as the mortgage crisis because it was triggered by the widespread default on subprime mortgages in the United States.

Multiple choice

Bad Debts a risk for business, is an example of

  1. Political Cause

  2. Technical Cause

  3. Natural Cause

  4. Human Cause
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Right answer Becasue it is a human cause, since if a customer or debtor is insolvent, he cannot pay the amount due which results in bad debts or loss for the business.

Multiple choice

EMI is normally used in respect of which of the following loans?

  1. Personal Loans;

  2. Home Loans;

  3. Consumer Loans;

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

EMI (Equated Monthly Installment) is a common repayment method used across various loan types, including personal, home, and consumer loans, to spread the principal and interest over a fixed period.