Tag: financing

Questions Related to financing

Companies generally invite public deposits for a period upto ________ years.

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

  1. One

  2. Two

  3. Three

  4. Four

Show answer
Correct Option: C
Explanation:
The deposits that are raised by organisations directly from the public are known as public deposits. The organization in return issues a deposit receipt as acknowledgement of the debt. Public deposits can take care of both short-term or medium-term financial requirements. Companies generally invite public deposits for medium-term period upto three years.

Cost of public deposits is generally _______ than the cost of borrowings from banks and financial institutions.

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

  1. Higher

  2. Lower

  3. Equal

  4. None of the above

Show answer
Correct Option: B
Explanation:
The deposits that are raised by organisations directly from the public are known as public deposits. Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions.

The deposits that are raised by organisations directly from the public are known as __________.

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

  1. Lease finance

  2. Public deposits

  3. Commercial paper

  4. Trade credit

Show answer
Correct Option: B
Explanation:

The deposits that are raised by organisations directly from the public are known as public deposits. Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions. Public deposits are beneficial to both depositor as well as the organization. 

Rates of interest offered on public deposits are usually _________ than that offered on bank deposits.

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

  1. Higher

  2. Lower

  3. Equal

  4. Both a and b

Show answer
Correct Option: A
Explanation:
The deposits that are raised by organisations directly from the public are known as public deposits. Rates of interest offered on public deposits are usually higher than that offered on bank deposits. 

Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form. The organisation in return issues a deposit receipt as acknowledgment of the debt.

Collection of public deposits may prove difficult, particularly when the size of deposits required is _________.

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

  1. Large

  2. Small

  3. Medium

  4. Both a and b

Show answer
Correct Option: A
Explanation:

The deposits that are raised directly from the public are public deposits. Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form. the cost of deposits to the company is less than the cost of borrowings from banks. But Collection of public deposits may prove difficult, particularly when the size of deposits required is large.

Public investment in a company is generally in the form of_______________.

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

  1. Shares, debentures and deposits

  2. Purchase of goods

  3. Money Transfer

  4. None of the above

Show answer
Correct Option: A
Explanation:

Public investment in a company is generally in the form of shares, debentures and deposits. It means public can invest in a company by purchasing shares, debentures and deposits.

Financial planning arrives at __________________.

commerce business finance financial planning financing financial management

  1. Minimising the external borrowing by resorting to equity issues

  2. Entering that the firm always have significantly more fund than required so that there is no paucity of funds

  3. ensuring that the firm paces neither a shortage nor a glut of unuable funds

  4. doing only what is possible with the funds that the firm has at tis disposal

Show answer
Correct Option: A
Explanation:

Financial planning aims at ensuring that the firm faces neither a shortage nor a glut of unusable funds. If there is shortage of funds then the firm will not be able to carry out its planned activities and commitment. On the other hand if there is excess funds available then it adds to cost of business which encourages waste of funds. Thus, financial planning focuses on ensuring the availability of just enough funds at right time.

The difference between current assets and current liabilities is:

commerce business finance financial planning financing financial management

  1. Gross working capital

  2. Net working capital

  3. Permanent working capital

  4. Temporary working capital

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Correct Option: B

Plans made for a period of _____ year or less is termed as budget.

commerce business finance financial planning financing financial management

  1. one

  2. two

  3. three

  4. four

Show answer
Correct Option: A
Explanation:

A budget is a financial plan for a defined period of time, usually a year.

A budget is the sum of money allocated for a particular purpose and the summary of intended expenditures along with proposals for how to meet them. It may include a budget surplus, providing money for use at a future time, or a deficit in which expenses exceed income.

________ funding is almost as bad as inadequate funding.

commerce business finance financial planning financing financial management

  1. Limited

  2. Short

  3. Excess

  4. Long

Show answer
Correct Option: C
Explanation:

Excess funding is almost as bad as inadequate funding. Funding involves cost like interest on loans which is a burden on the company.

Excess funding will result in excess interest on capital which is a negative impact on the company's financial position.