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 commerce sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

The cost of commercial paper to the issuing firm is ________ than the cost of commercial bank loans.

  1. lower

  2. higher

  3. equal

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

Commercial Paper is issued by one firm to another business firm, Insurance company, pension funds and it is an impersonal method of raising finances. therefore the cost of commercial paper to the issuing firm is lower than the cost of commercial bank loans.

Multiple choice commerce types of trade features of internal trade internal trade business and industry

If the realized collection period is more than the terms of trade it can be said that __________________.

  1. The collection job is over

  2. The quality of debtors is poor

  3. The average daily sales are low

  4. All of the above

  5. Both (A) and (B) above
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

If the realized collection period is more than the terms of trade, then it indicates that is taking more time to convert its receivables into cash. This could be due to poor collection efforts of the firm or poor quality of the debtors. 

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers business transactions and source document source documents voucher and transactions

An outstanding bonds are also classified as _______________.

  1. standing bonds

  2. outdated bonds

  3. dated bonds

  4. seasoned bonds
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Seasoned bonds are bonds that have been outstanding for a significant period and are actively traded in the secondary market.

Multiple choice organisation of commerce and management business capital/finance finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

Interest rate in cash credit is normally ______ bank credit account.

  1. higher than

  2. same

  3. lower than

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

Interest rate in cash credit is normally lower than bank credit account. Cash credit is a type of borrowing which can be obtained from the bank savings account without having credit balance, whereas bank credit refers to a loan which is issued by the banking company and which are to be repaid by the borrower with a higher interest rate.

Multiple choice organisation of commerce and management business capital/finance finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

Cash credit is normally given on security of stock, debtors etc. whereas bank credit is normally given on security of a fixed asset.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Cash credit is normally given on security of stock, debtors etc. whereas bank credit is normally given on security of a fixed asset- this is a rue statement.Cash credit is a type of borrowing which can be obtained from the bank savings account without having credit balance.

Multiple choice organisation of commerce and management business capital/finance finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

Factor(s) to consider before choosing trade credit or bank credit is/are _______.

  1. Rate of interest

  2. Processing fees

  3. Foreclosure charges

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
 Trade credit is provided by the suppliers whereas bank credit is provided by the banking companies. Factors to consider before choosing trade credit or bank credit are:a) Rate of interest
b) Processing fees
c) Foreclosure charges.
Multiple choice economics government budget and economy trade deficits, savings and investment public finance and budget public finance, taxes and budget

Expand the term FLCC.

  1. Financial Literacy and Credit Counselling

  2. Financial Literacy Communication Centre

  3. Financial Literacy Call Centre

  4. Fiscal Literacy and Credit Counselling
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

FLCC stands for Financial Literacy and Credit Counselling centres, which help individuals manage debt and financial planning.

Multiple choice elements of business marketing and sales difference between marketing and sales marketing and sales department ideologies/concepts/views of marketing management

Modigliani-Miller approach is based on the following assumptions:
I. All firms have equity capital
II. There is a perfect market
III. Investors act rationally
IV. Information about the market conditions is imperfect
Of these:

  1. I and IV are correct

  2. I, II and IV are correct

  3. I, II and III are correct

  4. All are correct
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Modigliani-Miller theorem assumes perfect capital markets, rational investors, and no transaction costs or taxes, which implies perfect information rather than imperfect information.

Multiple choice organisation of commerce and management sources of business finance - 2 equity and preference shares equity shares and preference shares non-institutional sources - long-term

Tick mark the correct answer.
Identify the source of finance that does not pose a burden on a company's finance.

  1. Debentures

  2. Public deposit

  3. Loans from financial institutions

  4. Retained earnings
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Retained earnings are internal funds generated by the company from its profits. Since they do not involve borrowing or external obligations, they do not impose a financial burden of interest or repayment.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Which of these statement is not true about debenture holders?

  1. Debenture holders are like the lenders of the company

  2. Debenture holders have priority of payment of interest and amount

  3. In case of loss the debenture holders are not entitled to interest on the debenture

  4. Interest on debenture is an allowable expenses
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Debenture holders are creditors of the company. They are entitled to interest regardless of whether the company makes a profit or a loss, as interest is a fixed financial obligation.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Redeemable debentures are those which are payable on the expiry of the ______ period either in lump sum or in installments during the life time of the company. 

  1. Specific

  2. Actual

  3. Indefinite

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

There are two type of debenture which are classified from the point of view of tenure i.e. 1. Redeemable debentures and 2. Irredeemable debentures.

Redeemable dentures are those which are payable on the expiry of the specific period either in lump sum or in installments during the life time of the company. Debentures can be redeemed either at par or at premium .

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Debentureholders having a floating charge have priority in payment over _________________.

  1. Sundry Creditors

  2. Secured Creditors

  3. Unsecured Creditors

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

 A debenture is a document that lays down the terms and conditions of a loan, and provides clarity and security to lenders if the borrowing company becomes insolvent. Attaching a floating charge to the debenture offers further benefits, enabling the holder to rank above unsecured creditors when it comes to repayment.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Debentures entails payment of fixed rate of interest until ____________.

  1. the company is not declared insolvent

  2. the principal sum is repaid

  3. the company desires not to pay

  4. the debenture holders resolves not to claim so
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Debentures are debt instruments. The company is obligated to pay interest at a fixed rate until the principal amount is repaid to the debenture holder at the time of maturity.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

_____are those debentures where the debenture holder have no option to convert into equity.

  1. Optional debentures

  2. Flexible debentures

  3. Convertible debentures

  4. Non-convertible
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Non-convertible debentures are those that do not offer the holder the option to convert the debt into equity shares. They remain debt instruments until maturity.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) types of issue of debentures types of debentures meaning and kinds of debentures

Issue of debentures as collateral securities means issue of such debentures as _________.

  1. Subsidiary security

  2. Principal security

  3. In lieu of principal security

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

Issue of Debentures as Collateral. Debentures issued as collateral security is secondary or parallel security for the original loan taken by the company. The lender can realize the collateral security in case borrower fails to make the payment of the original loan.

A Collateral Security is a Subsidiary Security.