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

Which of the following is not considered as National Debt?

  1. National Savings Certificates

  2. Long-term Government Bonds

  3. Insurance policies

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

National Debt refers to liabilities of the government. Insurance policies are private contracts between an individual and an insurance company, not government debt.

Multiple choice

What is the full form of “DSCR” in banking terms?

  1. Debt Service Coverage Ratio

  2. Debt Service Coverage Rate

  3. Debit Service Coverage Reserve

  4. Debit Service Credit Ratio
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

DSCR stands for Debt Service Coverage Ratio, a financial metric used to measure a company's ability to use its operating income to repay all debt obligations.

Multiple choice

Bad debts recovered are shown in the

  1. debit side of trading A/c

  2. credit side of trading A/c

  3. debit side of profit and loss A/c

  4. credit side of profit and loss A/c
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bad debts recovered an indirect income, is to be shown in the credit side of profit and loss A/c.

Multiple choice

If a bill is renewed,

  1. it is dishonoured on the due date

  2. it is paid on the due date

  3. the old bill is cancelled and a fresh bill is drawn

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

If drawee feels that he would be not able to pay the bill on due date, he requests the drawer to cancel the old bill and accept a fresh one. This is known as a renewal of bill.

Multiple choice

Directions: Read the passage/argument and answer the question that follows it.

The Federal Insurance Corp, which acts as the guarantor for all bank deposits in the US, estimates that over 1.5 million households will eventually be unable to meet their loan repayments during the next 5 years. The prices are falling and more forced sales due to failure of loan repayments will increase the already burgeoning stocks of unsold houses, which currently number upwards of 5 million.

The conclusion given in the first line of the paragraph above is based on which of the following assumptions?

  1. More people are taking loans to finance their purchase of dwelling units.

  2. There will not be any significant change in the disposable incomes and liabilities of those taking home loans in the US.

  3. The Federal Insurance Corp. will remain the sole guarantor of all future home loans in the US.

  4. Defaults on account of inability to service home loan repayments will increase in the foreseeable future.

  5. There is, in general, a recession in the US economy and the housing sector just tends to mirror this overarching trend.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Overall, the paragraph does not, at any point, address the issue of growth rate in case of home loans. Thus, Option (1) does not have any basis. Option (3) is again incorrect because even if it remains the sole guarantor, it does not impact the number of homes unable to repay their loans. This fact does not have any bearing on the issue at all. Option (4) is nothing but a corollary of the contents given in the paragraph. The assumption given in option (5) is utterly unjustified on the basis the information given in this case. Option (2) remains the best possible assumption underlying the conclusion as it presupposes that the households will have the same disposable income as before. Now, if we challenge this idea, there could be a real change in the ability of homeowners to service their loans. Thus, the Federal Insurance Corp’s conclusion certainly takes a beating because it remains the basis of all their calculations.

Multiple choice

Directions: The question is a logical sequence of statements with a missing link, the location of which is shown parenthetically. Choose the alternative that best fits the sequence logically.

A defect in the law may sometimes raise the rate of interest considerably above what the condition of the country, as to wealth or poverty, would require. When the law does not enforce the performance of contracts, it puts (.) with bankrupts or people of doubtful credit in better regulated countries. The uncertainty of recovering his money makes the lender exact the same usurious interest which is usually required from bankrupts.

  1. all borrowers nearly upon the same footing

  2. all the debtors along

  3. all the people with bad debts

  4. the institutions involved in loan cases

  5. all guarantors along
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The clue can be found in the line 'makes the lender exact the same usurious interest (from all borrowers) which is usually required from bankrupts'.