Tag: sources of business finance - 2

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Questions Related to sources of business finance - 2

Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

Public deposit obtained by a company means _______________.

  1. Deposits received from Government

  2. Deposits received from public at large

  3. Deposits received from stockists and agents

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

Public deposits obtained by a company means the deposits received by the company from public at large. Public deposits are unsecured, long term debt instrument. They have a slightly higher rate of interest when compared to that of interest rates of banks. They are usually issued to meet the working capital needs of the company.

Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

State with reason whether the following statement is true or false:
The amount of deposit is a long term source of capital.

  1. True

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

(i) A company collects the required amount of capital through different sources.
(ii) The small part of the capital is raised through borrowing
(iii) The greater part of the capital is raised by the company through the issue of shares.
(iv) The short term capital is raised by the  company accepting deposits from the general public.
(v) The deposit accepted  by the company
from the  general public are called public deposit.
(vi) A company accepts deposit for a minimum period of 6 months and for a maximum period of 3 years.
(vii) Because of the above reason, the amount of deposit is a short term source of capital.

Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

The merit(s) of public deposits is/are ______________________.

  1. Cost of public deposits is generally lower than the cost of borrowings.

  2. Public deposits do not usually create any charge on the assets of the company.

  3. As the depositors do not have voting rights, the control of the company is not diluted.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company. The merits of public deposits are:
a) Cost of public deposits is generally lower than the cost of borrowings.b) Public deposits do not usually create any charge on the assets of the company.
c) As the depositors do not have voting rights, the control of the company is not diluted.
Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

Limitation(s) of public deposit is/are _______.

  1. New companies generally find it difficult to raise funds through public deposits.

  2. It is an unreliable source of finance.

  3. Collection of public deposits may prove difficult when the size of deposits required is large.

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

 Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company. Limitations of public deposit are:a) New companies generally find it difficult to raise funds through public b) It is an unreliable source of finance.deposits.c) Collection of public deposits may prove difficult when the size of deposits required is large.

Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

Public deposits refer to the unsecured deposits invited by companies from the public mainly to finance working capital needs.

  1. True

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

Public deposits refer to the unsecured deposits invited by companies from the public mainly to finance working capital needs- this is a true statement.  Public deposits do not usually create any charge on the assets of the company.

Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

Renewal facility enables companies to use public deposits as medium-term finance.

  1. True

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

Renewal facility enables companies to use public deposits as medium-term finance- this is a true statement.Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company.

Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

Public deposits of a company cannot exceed _____ per cent of its share capital and free reserves. 

  1. 15

  2. 20

  3. 25

  4. 30
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company. Public deposits of a company cannot exceed 25 per cent of its share capital and free reserves.

Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing
State the following statement is True or False:
A document issued to public for collection of capital is prospectus.

  1. True

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

A document issued to public for collection of capital is prospectus- this is a true statement.The invitation to public for capital subscriptions is through prospectust. Prospectus provide details about the offer of sale to the public. It is issued by SEBI.

Multiple choice commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

State the following statement is True or False:
The invitation to public for capital subscriptions is through prospectus.

  1. True

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

The invitation to public for capital subscriptions is through prospectus- this a true statement. Prospectus provide details about the offer of sale to the public. It is issued by SEBI.

Multiple choice commercial studies sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

Public deposits takes care of both _________ and _________-term financial requirements of a business.

  1. Large, medium

  2. Medium, short

  3. Large, short

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Public deposits can take care of both medium and short-term financial requirements of a business. 
The deposits are beneficial to both the depositor as well as to the organisation. While the depositors get higher interest rate than that offered by banks.