Tag: classification of sources of finance

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Questions Related to classification of sources of finance

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

Public deposits are the deposits that are raised directly from _______.

  1. The public

  2. The directors

  3. The auditors

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

Public deposits refer to the deposits that are raised by the company or an organization directly from the public. Public deposits are an important source of financing the medium term and long term requirements of a company.

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 true with respect to sources and uses of funds?

  1. Depreciation and decrease in NWC are sources of funds

  2. Depreciation and decrease in NWC are uses of funds

  3. Depreciation is a source of fund but decrease in NWC is use of fund

  4. Depreciation in a use of fund but decrease in NWC is source of fund.

  5. Depreciation and increase in NWC are uses of funds.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As per the accounting principles to ascertain the profits of the firm, depreciation on fixed assets should be charged against the revenue of the fir by debiting to the profit and loss account. This reduces the profits of the firm. But charging depreciation does not involves any fund. Therefore, the amount of depreciation charged against the revenue of the firm should be  added back to the net profit to estimate the funds from operations, which is a source of fund. Decrease in net working capital is a source of fund.

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

$\frac{Shareholder's funds}{total assets}\100$ is a ____________.

  1. liquidity ratio

  2. solvency ratio

  3. profitability ratio

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

Share holder's funds = equity share capital + Pref. shares + reserves and surplus - losses
Share holder's fund = net worth = proprietary fund = equity
Equity share holder's fund = share holders fund - pref. shares.

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

Find the correct match of finance organization and their headquarters?

  1. ADB-Manila

  2. RBI-New Delhi

  3. IMF-NewYork

  4. IDA-Geneva
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Asian Development Bank (ADB) has its headquarters in Manila, Philippines. The other options are incorrect: RBI is in Mumbai, IMF is in Washington D.C., and IDA is in Washington D.C.

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

The Principal sources of capital at the earliest stages of the firm ______________.

  1. Equity capital

  2. Short term debts

  3. Long term debts

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

Early-stage firms often rely on a mix of equity capital (from founders or investors) and short-term debt (like trade credit or bank loans) to manage initial operations.

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

Operating cycle can be delayed by ________________.

  1. Increase in WIP period

  2. Decrease in raw materials storage period

  3. Decrease in credit payment period

  4. Both (A) and (C) above

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

Operating cycle period = Raw material storage period + Conversion period + Finished goods storage period + average collection period - average payment period.
Increase in WIP (or conversion) period will increase the operating cycle period and this will lead to delay in the operating cycle.

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

The use of borrowings for the purpose of financial advantage for residual stockholders is also called ____________.

  1. Trading on equity

  2. Leverage

  3. Either (a) or (b)

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

Trading on equity, which is also referred to as financial leverage occurs when a corporation uses bonds, other debt, and prefered stock  to increase its earnings on its common stock.

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 equity anticipation security is usually classified as ______________.

  1. short-term options

  2. long-term options

  3. short money options

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

LEAPS (Long-term Equity Anticipation Securities) are options contracts with expiration dates longer than one year, making them long-term options.

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 a requirement of financing a plan?

  1. Matching financial resources to physical targets

  2. Realisation of Plan target through correct implementation

  3. Raising financial resources to implement the Plan

  4. To make the Plan smaller in size to be met by the available resource.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Financing a plan requires aligning the available financial resources with the physical targets set in the plan to ensure feasibility.

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.