Sources of Business Finance Test

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Sources of Business Finance Test - 44

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Weekly Quiz Competition

Question 1
1 / -0

Capital rationing is applied in a situation where ________________________.

A
It is difficult to bring in required amount of capital

B
Financial institutions are doubtful or not sure of the viability of the project

C
A large number of investment proposals compete for limited funds

D
The dividend is converted into capital for completion of a new project
Question 2
1 / -0

Balance of Debenture Redemption Reserve Account is transferred to _____________.

A
Capital Reserve A/c

B
Profit and Loss A/c

C
General Reserve A/c

D
None of these

Solution

The amount proportionate to the debentures redeemed shall be transferred from Debenture Redemption Reserve (DRR) to General Reserve. Since, the DRR is created out of profits of the company & is debited to the statement of P&L previously, now it is transferred to general reserve to give effect to the earlier reduction in profit.
Question 3
1 / -0

Auction Rated Debentures (ARDs) are a hybrid of _________________.

A
Shares and Debentures

B
Shares and Commercial Papers

C
Commercial Papers and Debentures

D
Zero Interest Bonds and Deep Discount Bonds

Solution

An auction rate debenture, typically, refers to a debt instrument (corporate or municipal bonds) with a long-term nominal maturity for which the interest rate is regularly reset through a dutch auction. It is a mix of debentures and commercial paper.
Question 4
1 / -0

Select the correct one/ones about the debenture holders of a company, using the code given below:
1. They are like shareholders of the company.
2. They are creditors to the company.
3. They are called in the company's annual general meetings.

A
Only 1

B
Only 2

C
2 and 3

D
1 and 3

Solution

Companies borrow through debentureit may be issued to the existing shareholders of the company as well as to the non-existing shareholders. Debenture holders get interest on the debentures they hold.
Question 5
1 / -0

____________ Debentures are to be redeemed on the expiry of a certain period.

A
Redeemable

B
Irredeemable

C
Convertible

D
Non-convertible
Question 6
1 / -0

____ is an example for long term liabilities.

A
Creditors

B
Debentures

C
Overdraft

D
Bills payable

Solution

Debentures are common securities issued under borrowed fund capital. Debentures are instruments for raising long-term debt capital. Debentures are called creditor ship securities because debenture holders are called creditors of a company. The debenture is also an example of long-term liabilities.
Question 7
1 / -0

Which of the following is/are the correct aim/aims of the Basel III norms—select the code:
1.Improving governance of the banks
2.Bettering closure process of the banks
3.Enhancing banks' profit

A
Only 1

B
1 and 2

C
Only 3

D
2 and 3

Solution

Basel III norms are not related to the profit earnings of the banks.
Question 8
1 / -0

Select the correct one/ones about the RBI's role of 'regulator and supervisor' of the financial system:
1. RBI prescribes broad parameters of banking operations within which the country's banking and financial system functions.
2. Objective of this is to maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

A
Only 1

B
Only 2

C
1 and 2

D
Neither 1 nor 2

Solution

These are the two 'regulatory and supervisory' functions of the RBI being followed by it since its nationalisation in 1949.
Question 9
1 / -0

Select the proper option from the options given and rewrite the sentences:
'Global Depository Receipt' enables to raise more capital in the ______ market.

A
National

B
International

C
Local

D
None of these
Solution
- Financial Intermediaries such as depository banks purchase the shares in one country, create a GDR containing those shares, and sell the GDR in the foreign market.
- It helps companies raise capital from foreign markets means international market. GDR is a negotiable instrument, which can be denominated in any freely convertible security
Question 10
1 / -0

A commercial paper's maturity period typically ranges between _______________.

A
10 to 400 days

B
90 to 364 days

C
60 to 90 days

D
12 to 365 days

Solution

Commercial paper is a money-market security issued by large body corporates to raise funds to meet short-term debt obligations. Generally, it ranges from 90 to 364 days.

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Re-Attempt Weekly Quiz Competition

Sources of Business Finance Test - 44

Result

Sources of Business Finance Test - 44

Score

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Rank

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SHARING IS CARING

Question 1

It is difficult to bring in required amount of capital

Financial institutions are doubtful or not sure of the viability of the project

A large number of investment proposals compete for limited funds

The dividend is converted into capital for completion of a new project

Question 2

Capital Reserve A/c

Profit and Loss A/c

General Reserve A/c

None of these

Solution

Question 3

Shares and Debentures

Shares and Commercial Papers

Commercial Papers and Debentures

Zero Interest Bonds and Deep Discount Bonds

Solution

Question 4

Only 1

Only 2

2 and 3

1 and 3

Solution

Question 5

Redeemable

Irredeemable

Convertible

Non-convertible

Question 6

Creditors

Debentures

Overdraft

Bills payable

Solution

Question 7

Only 1

1 and 2

Only 3

2 and 3

Solution

Question 8

Only 1

Only 2

1 and 2

Neither 1 nor 2

Solution

Question 9

National

International

Local

None of these

Solution

Question 10

10 to 400 days

90 to 364 days

60 to 90 days

12 to 365 days

Solution

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