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Sources of Business Finance Test 1

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Sources of Business Finance Test 1
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Weekly Quiz Competition
  • Question 1
    1 / -0
    The life of a company is not affected by the ___ of a share holder.
    Solution
    The incorporation of a company is an artificial entity recognized by the law as a legal person that exists independently with rights and liability. This means that a company is treated as a separate person from its participants.
    This separate legal personality has the consequence that a company has perpetual succession. The life of the company is not affected by the death, disability, insolvency or disagreement of a shareholder. Its existence is ended when it is wound up pursuant to the Companies Acts.The shareholders may come or go the life of the company like an artificial person is least affected by these changes.
  • Question 2
    1 / -0
    Expand ICD.
    Solution
    Inter-corporate Deposit is the deposits made by one company with another company. This option of using finance is available to all public companies whether having share capital or not. 
  • Question 3
    1 / -0
    Who, among the following, are called owners of the company?
    Solution
    Equity share is common security issued to raise capital for the business classified as shareholders' funds or owners' funds. Equity shares are the most important source for raising long-term capital.
  • Question 4
    1 / -0
    Debenture holders are also referred to as _______________.
    Solution
    Debentures are financial securities issued by a company to borrow funds from the public. These are the instruments for raising long-term debt capital. Debentures are called creditorship securities because debenture holders are called creditors of a company.
  • Question 5
    1 / -0
    The Principal sources of capital at the earliest stages of the firm ______________.
  • Question 6
    1 / -0
    A stock dividend is paid out of ________________.
  • Question 7
    1 / -0
    The use of borrowings for the purpose of financial advantage for residual stockholders is also called ____________.
    Solution

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

    Hence, option (A) is the correct answer.

  • Question 8
    1 / -0
    Funds are raised_____________.
    Solution
    Funds are the monetary efficiency that is provided to a company for the operation of its day to day a business activities.

    These funds can be raised through many resources which includes the reinvestment of the retained earnings of a company, raising loans while the purchase of machinery for the company or through reducing the value of their current asset that is through reducing the requirements of working capital.
  • Question 9
    1 / -0
    In business, leverage is the means of ______________.
    Solution

    Leverage means a business strategy of the Companies to increase the assets, cash flows, and returns, even losses can also be analyzed by using the strategy. There are two main types of leverage:-

    1. Financial Leverage- A firm may borrow capital through issuing fixed securities or by borrowing money directly from a lender just to increase its financial leverage,

    2. Operating Leverage- It is used to magnify cash flows and returns.

    Hence, option (A) is the correct answer.

  • Question 10
    1 / -0
    Nomination facility is available to
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