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 company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Which of the following is false?

  1. Equity is owner's estate and the debenture is a debt

  2. Rate of interest on debentures is fixed

  3. Debenture holders get preferential treatment over the equity holders at the time of liquidation

  4. Interest on debentures is an appropriation of profits
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest on debentures is a charge against profit, not an appropriation. Appropriations are distributions of profit (like dividends), whereas interest is an expense that must be paid regardless of profit.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Interest payable on debentures is?

  1. An appropriation of profits of the company

  2. A charge against profit of the company

  3. Transferred to sinking fund investment account

  4. Transferred to general reserve
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest on debentures is a mandatory payment to creditors, making it a charge against profits, which must be deducted to arrive at the net profit.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

In debenture account _________ is to be mentioned.

  1. Name of the debenture

  2. Rate of interest

  3. Date of issue of debenture

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

The name of the debenture account typically includes the rate of interest to distinguish it from other debentures issued by the company.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Interest is paid to the person who produces the interest coupon attached to debenture in case of -

  1. Bearer Debentures

  2. Registered Debentures

  3. All types of Debentures

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

Option A is correct.

The debentures which are payable to bearer and whose names do not appear in the register of debenture holders are known as “Bearer Debentures”. Coupons for interest are attached to the document and interest is paid to the holders as it falls due. Bearer Debentures are transferably by mere delivery.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Which of the following statement is true?

  1. Debentures bear fixed interest

  2. Interest on debenture is an appropriation of profit

  3. Debenture holders have voting right

  4. Debentures cannot be issued for consideration other than cash
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Debentures are debt instruments, and the interest rate is fixed at the time of issue. They do not carry voting rights, and interest is a charge, not an appropriation.

Multiple choice organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

Installment credit scheme is introduced by ________.

  1. IDBI

  2. IFCI

  3. UTI

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

Installment Credit Scheme was introduced by IFCI. Under this scheme, better flexibility in repayment period and simplicity in interest calculation is provided. To avail this scheme, the company should have satisfactory track record of its credit worthiness and financial position.

Multiple choice organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

The IFCI granted credit assistance to __________.

  1. public limited companies

  2. co-operatives engaged in manufacturing, mining and generation and distribution of electricity

  3. small and medium industries

  4. both (A) and (B)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
  • First, the main function of the IFCI is to provide medium and long-term loans and advances to industrial and manufacturing concerns. It looks into a few factors before granting any loans. They study the importance of the industry in our national economy, the overall cost of the project, and finally the quality of the product and the management of the company. If the above factors have satisfactory results the IFCI will grant the loan.
Multiple choice organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

The SFCs are granted credit assistance to ___________.

  1. large public limited companies

  2. cooperatives

  3. small and medium sized industries

  4. all of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

SFC stands for State Finance Corporations. It promotes medium and small industries of the particular states and also ensures balanced regional development, employment generation and vast ownership of industries.

Multiple choice organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

The FCCB's are issued in a foreign currency and carry a ________ interest rate which is ________ than the rate of any other similar non-convertible debt instrument.

  1. fixed, higher

  2. fixed, lower

  3. fluctuating, lower

  4. fluctuating, higher
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period. The FCCB's are issued in a foreign currency and carry a fixed interest rate which is lower than the rate of any other similar non-convertible debt instrument.
Multiple choice

Which of the following is a common type of housing finance instrument?

  1. Mortgage

  2. Home equity loan

  3. Reverse mortgage

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

Common types of housing finance instruments include mortgages, home equity loans, and reverse mortgages.

Multiple choice

What is a credit score?

  1. A number that lenders use to assess your creditworthiness.

  2. A measure of how much debt you have.

  3. A record of your payment history.

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

A credit score is a number that lenders use to assess your creditworthiness. It is a measure of how much debt you have and a record of your payment history.

Multiple choice

What is the relationship between the Bank Rate and the Repo Rate?

  1. The Bank Rate is always higher than the Repo Rate

  2. The Bank Rate is always lower than the Repo Rate

  3. The Bank Rate and the Repo Rate are the same

  4. The relationship between the Bank Rate and the Repo Rate varies
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Bank Rate is the rate at which the RBI lends money to commercial banks, while the Repo Rate is the rate at which commercial banks borrow money from the RBI. Typically, the Bank Rate is set higher than the Repo Rate.

Multiple choice

What is the relationship between the Bank Rate and the Reverse Repo Rate?

  1. The Bank Rate is always higher than the Reverse Repo Rate

  2. The Bank Rate is always lower than the Reverse Repo Rate

  3. The Bank Rate and the Reverse Repo Rate are the same

  4. The relationship between the Bank Rate and the Reverse Repo Rate varies
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Reverse Repo Rate is the rate at which the RBI borrows money from commercial banks. Typically, the Bank Rate is set higher than the Reverse Repo Rate.

Multiple choice

Which of the following is a secured debt?

  1. A loan backed by collateral

  2. A credit card balance

  3. A personal loan

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

A secured debt is a loan or other obligation that is backed by collateral, which is an asset that can be seized and sold to satisfy the debt if the borrower defaults.

Multiple choice

What is the primary difference between a secured debt and an unsecured debt?

  1. Secured debts have higher interest rates

  2. Secured debts have shorter repayment terms

  3. Secured debts are backed by collateral

  4. Secured debts are not subject to bankruptcy discharge
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The primary difference between a secured debt and an unsecured debt is that a secured debt is backed by collateral, while an unsecured debt is not.