Sources of Business Finance Test

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Sources of Business Finance Test - 14

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Weekly Quiz Competition

Question 1
1 / -0

When investment in own debentures is cancelled the profit on cancellation is credited to ___________________.

A
Sinking fund account

B
Debenture Redemption reserve account

C
Capital reserve account

D
Any of the above

Solution

When investment in own debenture is cancelled the profit on cancellation is credited to - Debenture Redumption Reserve Account.Because working capital of tge company is adversely affected, it is desirable that the amount equal to the nominal value of the debenture cancelled should be transferred to the debenture redemption reserve a/c out of the profit of the company.
This will help in maintaing the working capital of the company by noy paying as dividend as part of the profit set aside.
Question 2
1 / -0

The maturity period of a commercial paper usually ranges from ________.

A
20 to 40 days

B
60 to 90 days

C
120 to 365 days

D
90 to 364 days

Solution

Commercial paper is issued by a firm to raise funds for a short period of time, the time can be ranging from 90 days to 364 days after which it has to be redeemed. Commercial paper is an unsecured promissory note.
Question 3
1 / -0

Equity shareholders are called ________.

A
Owners of the Company

B
Partners of the Company

C
Executives of the Company

D
Guardian of the Company

Solution

Equity shares represent the ownership of a company, hence the capital raised by issue of such shares is referred to as ownership capital and shareholders are called owners of the company.
Question 4
1 / -0

Which of the following is the major function of an ATM installed by banks?

A
To distribute cash by way of withdrawal from one's account

B
To transfer money from one place to another place

C
To detect fake currency notes

D
To arrange currency notes in serial order and count them

Solution

Automated Teller Machine (ATM) is an electro-mechanical machine that is used for making financial transactions basically to withdraw money from personal bank accounts.
Question 5
1 / -0

Which is of the following is / are false?

A
In the FIFO method the issue is in the order of receipt.

B
In the replacement method the current realizable value is taken for pricing the issues.

C
In the weighted average method issue price is the weighted average of quantity and price and the weight being the percentage of value of each lot in the total stock.

D
Under inflationary conditions LIFO method will show low value of inventory.

E
Both (B) and (D) above

Solution

In the Weighted average cost method the pricing of the materials is done on weighted average basis and the weights will be based on the quantity.
Question 6
1 / -0

In computing debt/equity ratio, debt means ________________.

A
Debentures as well as other long term loans

B
Short term creditors

C
Short term as well as long term creditors

D
Term loans
Question 7
1 / -0

If the stock velocity is 6, cost of goods sold is Rs.54,000 and closing stock is Rs.10,000 the opening stock is __________.

A
Rs. 8,000

B
Rs. 9,000

C
Rs. 10,000

D
Rs. 12,000

E
Rs. 18,000

Solution

Let the opening stock is x.
Stock velocity = cost of goods sold / average inventory
6 = 54,000/(10000+x)/2
hence x = Rs.8,000.
Question 8
1 / -0

Which of the following is true with respect to sources and uses of funds?

A
Depreciation and decrease in NWC are sources of funds

B
Depreciation and decrease in NWC are uses of funds

C
Depreciation is a source of fund but decrease in NWC is use of fund

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

E
Depreciation and increase in NWC are uses of funds.

Solution

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.
Question 9
1 / -0

'GAB' scheme refers to

A
General Agreement on Borrowings

B
General Arrangement o Borrowings

C
General Arrangement to Borrow

D
None of the above
Question 10
1 / -0

When the coupon rate is less than the required rate of return the discount on the bond ___________ as maturity approaches.

A
Decreases

B
Increases

C
Does not change

D
First decreases then increases

E
First increases then decreases

Solution

When the required rate of return is greater than coupon rate then the discount on the bond declines as the maturity approaches.

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Re-Attempt Weekly Quiz Competition

Sources of Business Finance Test - 14

Result

Sources of Business Finance Test - 14

Score

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Rank

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SHARING IS CARING

Question 1

Sinking fund account

Debenture Redemption reserve account

Capital reserve account

Any of the above

Solution

Question 2

20 to 40 days

60 to 90 days

120 to 365 days

90 to 364 days

Solution

Question 3

Owners of the Company

Partners of the Company

Executives of the Company

Guardian of the Company

Solution

Question 4

To distribute cash by way of withdrawal from one's account

To transfer money from one place to another place

To detect fake currency notes

To arrange currency notes in serial order and count them

Solution

Question 5

In the FIFO method the issue is in the order of receipt.

In the replacement method the current realizable value is taken for pricing the issues.

In the weighted average method issue price is the weighted average of quantity and price and the weight being the percentage of value of each lot in the total stock.

Under inflationary conditions LIFO method will show low value of inventory.

Both (B) and (D) above

Solution

Question 6

Debentures as well as other long term loans

Short term creditors

Short term as well as long term creditors

Term loans

Question 7

Rs. 8,000

Rs. 9,000

Rs. 10,000

Rs. 12,000

Rs. 18,000

Solution

Question 8

Depreciation and decrease in NWC are sources of funds

Depreciation and decrease in NWC are uses of funds

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

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

Depreciation and increase in NWC are uses of funds.

Solution

Question 9

General Agreement on Borrowings

General Arrangement o Borrowings

General Arrangement to Borrow

None of the above

Question 10

Decreases

Increases

Does not change

First decreases then increases

First increases then decreases

Solution

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