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 book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

Retirement of bill means __________.

  1. making payment before the due date

  2. cancellation of the bill

  3. sending the bill for collection

  4. endorsing the bill in favour of third party
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Retirement of a bill is a specific accounting term for the early payment of a bill of exchange by the drawee to the drawer, often in exchange for a rebate or discount.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

At the time of retirement of a bill a exchange, the drawee credit ___________.

  1. interest A/c

  2. commission A/c

  3. bank A/c

  4. bills receivable A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a bill is retired, the drawee pays the amount to the drawer. In the drawee's books, the payment is made via bank, so the bank account is credited as it is an outflow of funds.

Multiple choice social science handicrafts and handlooms markets markets around us our bazaars

Small and medium farmers are forced to borrow money from moneylenders, traders, millers etc because ___________________.

  1. they charge a minimum interest rate.

  2. they are very friendly.

  3. it is difficult for the small and medium farmers to obtain a loan from regular banks.

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

Small and medium farmers are forced to borrow from moneylenders,traders,millers etc because it is very difficult for them to obtain a loan from regular banks.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Which of the following does not constitute a source of medium term financing?

  1. Issue of equity shares

  2. Issue of preference shares

  3. Term loans from banks

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

Equity shares represent permanent capital (long-term), not medium-term financing. Preference shares and term loans are standard instruments for medium-term capital.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Which of the following is/are the source(s) of short term finance?

  1. Trade Credit

  2. Cash advance loan

  3. Short term Borrowings

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

Short term finance is type of business financing where it is obtained for a year or less. The sources of short term finance are: trade credit, cash advance loan and short term borrowings.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

In each bank, within a credit-rating scale, borrowers are classified into _____________________.

  1. Excellent, Good and Average

  2. Below Average or Unsatisfactory

  3. Excellent and Below Average

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Banks typically categorize borrowers into a spectrum of risk, ranging from excellent/good to below average/unsatisfactory, to determine creditworthiness.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Classification on on the basis of ownership basis includes ___________.

  1. Owner's funds

  2. Borrowed funds

  3. Loan funds

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

The classification of funds on the basis of ownership of funds raised by a business or a company are: 

Owner's Funds: The funds raised by the owner of the company or business are known as owner's funds
Borrowed Funds: The funds raised by borrowing from the public or investors are known as borrowed funds.
Loan Funds: The funds that are raised on the basis of a loan taken from the bank, government or investors are known as loan funds.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Medium-term sources of finance include __________.

  1. Loans from financial institutions

  2. Lease financing

  3. Public deposits

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

Medium-term sources of funds are usually for a period of more than one year but not exceeding five years in duration. These finances include, loan from commercial banks or financial institutions, lease financing, public deposits, etc.

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Sources that provide funds for a short duration are called ______________.

  1. Trade credit

  2. Loans from commercial banks

  3. Commercial papers

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

Sources of funds that provide funds for a duration of less than one year are:

Trade Credits: These are the credits granted to manufacturers and traders by the suppliers of raw materials.
Loans from commercial banks: Commercial banks grant short-term finance to business firms which is known as bank credit
Commercial papers:Commercial paper is a money-market security issued (sold) by large corporations to obtain funds to meet short-term debt obligations  

Multiple choice elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

Long-term sources of finance includes ____________.

  1. Debentures

  2. Long-term borrowings

  3. Loans from financial institutions

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

The long-term sources fulfil the financial requirements of an enterprise for a period exceeding 5 years and include sources such as shares and debentures, long-term borrowings and loans from financial institutions.

Such financing is generally required for the acquisition of fixed assets such as equipment, plant, etc.

Multiple choice economics how does production take place? entrepreneur land,labour, capital and entrepreneur production mechanism

Which of the following is way of funding social entrepreneurs ? 
I. Loan Guarantees
II. Quasi-equity debt
III. Pooling 
Select the correct answer from the options given below - 

  1. $I$
  2. $II$
  3. $III$
  4. $All$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
1)loan guarantee is a promise by one party to assume the debt obligation of a borrower if that borrower defaults.
2)a category of debt taken on by a company that has some traits of equity is known as quasi equity debt.
3)in resource management ,pooling is the grouping together of resources for the purpose of maximizing advantage and minimizing risk to the users
Multiple choice economics how does production take place? entrepreneur land,labour, capital and entrepreneur production mechanism

The Bill & Melinda Gates Foundation now ______________.

  1. issues loan guarantees

  2. issues direct funds

  3. leverage the position

  4. acts as financial vehicle
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Bill and Melinda Gates Foundation now issues loans,rather than direct funds ,to some of the enterprise it supports ,recognizing that this is an efficient way to leverage its donations and provide organizations with more certain-funding.