Sources of Business Finance Test

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Sources of Business Finance Test - 21

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Weekly Quiz Competition

Question 1
1 / -0

A company issued 14% debentures of Rs. 1000 each at Rs. 900 to be redeemable at Rs. 1050. The difference of Rs. 150 will be

A
Debited to loss on issue of debenture A/c

B
Credited to loss on issue of debenture A/c

C
Preliminary expenses A/c

D
Capital loss A/c
Question 2
1 / -0

Which of the following can be treated as an external economy of scale?

A
Coming up of various Private and Nationalized Banks in the particular area.

B
Development of Rapid Transport System in the particular area by Local Government

C
Specialized Training and Research Centres developed by Trade Associations

D
All the three
Question 3
1 / -0

Interest on debenture is a.......

A
appropriation of profit

B
charge against profit

C
non-allowable expense

D
non-cash expense

Solution

Interest on debentures is a charge against profits and, therefore, its payment is not subject to the earning of profits. The amount so deducted must be paid to the debentures holders.
Therefore, B is the correct option.
Question 4
1 / -0

In order to check inflation which of these measures would be more appropriate for the Central Bank to take ______________.

A
Print more money

B
liberalize exports

C
Close a few banks temporarily

D
Hike bank lending rate
Question 5
1 / -0

Which one of the statements applies only to Preference Shareholders?

A
Shareholders risk the loss of investment.

B
Shareholders bear the risk of no dividends in the year of losses.

C
Shareholders usually have the right to vote.

D
Dividends are usually a fixed amount in every financial year.

Solution

The preference shares are the ones which preferential rights like prior payment of dividend and return of capital. The dividend also remains the same for every financial year and the company has a fixed liability to pay the interest and the amount of profits cannot define the payment of interest on preference shares.
Hence, option (D) is the correct answer.
Question 6
1 / -0

The underwriting commission in the case of issue of debentures cannot exceed _______________.

A
2%

B
2.5%

C
3%

D
5%

Solution

According to Companies Act, underwriting commission should not exceed 5 per cent of the nominal value of a share and 2½ per cent in the case of debentures.
Therefore, B is the correct option.
Question 7
1 / -0

Which of the following is false?

A
Equity is owners' stake and the debentures is a debt

B
Rate of interest on debentures is fixed

C
Debenture holders get preferential treatment over the equity holders at the time of liquidation

D
Interest on debentures is an appropriation of profits
Question 8
1 / -0

In dematerialization of shares ______ passes the physical shares to company for making it into electronic form.

A
Shareholder

B
Depository participant

C
Bank

D
None of the above

Solution

The depository participant is an agent of the depository. An investor has to interact only with a DP and not with the depository for all his dealing in shares in electronic form. In dematerialization of shares, depository participant passes the physical shares to the company for making it into electronic form. Depository participant refers to the agent between depository and investors.Hence, option (B) is the correct answer.
Question 9
1 / -0

Rematerialization of shares means __________.

A
Getting the share certificates in bank account

B
Converting them into money by selling the shares

C
Getting the share certificate in the physical form

D
None of the above

Solution

Rematerialization of shares means getting the share certificate in physical form. It also refers to the process of converting the shares in physical form which are held into electronic form.
Hence, option (C) is the correct answer.
Question 10
1 / -0

On May 1, 2004, Impex Ltd. issued 7% 10,000 convertible debentures of Rs 100 each at a premium of 20%. Interest is payable on September 30 and March 31 every year. Assuming that the interest runs from the date of issue, the amount of interest expenditure debited to profit and loss account for the year ended March 31, 2005=?

A
Rs 70,000

B
Rs 58,333

C
Rs 84,000

D
Rs 64,167

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Re-Attempt Weekly Quiz Competition

Sources of Business Finance Test - 21

Result

Sources of Business Finance Test - 21

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SHARING IS CARING

Question 1

Debited to loss on issue of debenture A/c

Credited to loss on issue of debenture A/c

Preliminary expenses A/c

Capital loss A/c

Question 2

Coming up of various Private and Nationalized Banks in the particular area.

Development of Rapid Transport System in the particular area by Local Government

Specialized Training and Research Centres developed by Trade Associations

All the three

Question 3

appropriation of profit

charge against profit

non-allowable expense

non-cash expense

Solution

Question 4

Print more money

liberalize exports

Close a few banks temporarily

Hike bank lending rate

Question 5

Shareholders risk the loss of investment.

Shareholders bear the risk of no dividends in the year of losses.

Shareholders usually have the right to vote.

Dividends are usually a fixed amount in every financial year.

Solution

Question 6

2%

2.5%

3%

5%

Solution

Question 7

Equity is owners' stake and the debentures is a debt

Rate of interest on debentures is fixed

Debenture holders get preferential treatment over the equity holders at the time of liquidation

Interest on debentures is an appropriation of profits

Question 8

Shareholder

Depository participant

Bank

None of the above

Solution

Question 9

Getting the share certificates in bank account

Converting them into money by selling the shares

Getting the share certificate in the physical form

None of the above

Solution

Question 10

Rs 70,000

Rs 58,333

Rs 84,000

Rs 64,167

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