Practice Test

Q1) One difference between a financial lease and operating lease is that Show Answer

Q2) In finance, “working capital” means the same thing as Show Answer

Q3) Which of the following would be consistent with a more aggressive approach to financing working capital? Show Answer

Q4) Which asset liability combination would most likely result in the firm’s having the greatest risk of technical insolvency ? Show Answer

Q5) Which of the following illustrates the use of a hedging (or matching) approach to financing ? Show Answer

Q6) In deciding the appropriate level of current assets for the firm, management is confronted with Show Answer

Q7) Varies inversely with profitability Show Answer

Q8) Spontaneous financing includes Show Answer

Q9) Permanent working capital Show Answer

Q10) Financing a long lived asset with short term financing would be Show Answer

Q11) Net working capital refers to Show Answer

Q12) Factoring involves _________ Show Answer

Q13) In case of any default, the factor has to bear risk of loss due to bad debts Show Answer

Q14) Working capital finance is provided against inventories Show Answer

Q15) The type of collateral kept for short term loan is Show Answer

Q16) Which of the following is a liability of a bank? Show Answer

Q17) Commercial paper is a type of Show Answer

Q18) Which of the following is not a spontaneous of short term funds? Show Answer

Q19) In India, commercial papers are issued as per the guidelines issued by Show Answer

Q20) Commercial paper are generally issued at a price Show Answer

Q21) Which of the following is not applicable to commercial papers Show Answer

Q22) Cash Discount terms offered by trade creditors should never be accepted because Show Answer

Q23) Credit purchase can be a good source of short term finance Show Answer

Q24) Short term unsecured debentures or not popular among Indian corporates Show Answer

Q25) Reserve bank of India constituted Tandon committee to suggest the norm for long term credit facility from bank to borrowers Show Answer

Q26) Bill discounting is a good source of short term finance to all firms Show Answer

Q27) Commercial papers can be issued only if minimum credit rating is procured by the issuer company Show Answer

Q28) Same considerations are applicable to short term sources as well as long term sources of funds Show Answer

Q29) In India, commercial papers can be issued for any amount and for any duration Show Answer

Q30) A firm should always arrange the funds by delaying the payment to creditors and payables Show Answer

Q31) Trade credit is a spontaneous source of finance. Show Answer

Q32) There are neither explicit nor implicit financial(interest) cost of trade credit Show Answer

Q33) Cash credit and working capital term loans are two ways by which working capital finance is octane by banks in India Show Answer

Q34) Like cash credit, letter of credit is also a direct form of working capital financing provided by banks Show Answer

Q35) Under hypothecation mode of security, Banks provide credit to borrowers against the security of movable property, say, inventory of goods. Show Answer

Q36) Factoring involves the outright sale of receivables at a discount to obtain funds. Show Answer

Q37) Factoring without recourse facilitates of balance sheet financing. Show Answer

Q38) Rate of commission charged by a factor is the same whether the debts are factored with recourse or without recourse. Show Answer

Q39) Commercial papers are regulated by SEBI Show Answer

Q40) All public limited companies whose securities are listed on the stock exchange are entitled to raise funds by issuing commercial papers. Show Answer

Q41) Spontaneous source of working capital Show Answer

Q42) Internal long term source include Show Answer

Q43) External short term sources include Show Answer

Q44) Working capital finance is provided against Show Answer

Q45) The charge for working capital finance may be Show Answer

Q46) Cash credit is permitted against Show Answer

Q47) MPBF refers to Show Answer

Q48) Public Deposits are accepted for a maximum of Show Answer

Q49) Interest on Debentures is Show Answer

Q50) Factoring involves Show Answer

Q51) In case of any default by debtors the factor has to Show Answer

Q52) The factor has to Show Answer

Q53) In factoring credit investigation is done by Show Answer

Q54) Factoring is also called as Show Answer

Q55) Factoring involves Show Answer

Q56) The parties to the factoring are Show Answer

Q57) Factor advances up to 70%, to 80% of debt in Show Answer

Q58) Factor advances up to 80% to 90% of debt in Show Answer

Q59) Factoring saves Show Answer

Q60) Factoring saves Show Answer

Q61) Trade creditors is spontaneous source of finance. Show Answer

Q62) Trade creditors is spontaneous source of finance. Show Answer

Q63) Trade creditors is spontaneous source of finance. Show Answer

Q64) Trade creditors is spontaneous source of finance. Show Answer

Q65) Retained profit is an internal source of finance. Show Answer

Q66) Depreciation is an external source of finance. Show Answer

Q67) Working capital finance is provided against inventories. Show Answer

Q68) Charge for working capital finance may be trust receipts. Show Answer

Q69) Cash credit is permitted against mortgage. Show Answer

Q70) MPBF refers to minimum permissible bank finance. Show Answer

Q71) Interest on debentures is paid out of income. Show Answer

Q72) Interest rate on commercial paper is generally less than the bank borrowing rate. Show Answer

Q73) CRISIL awards A 1 plus. Show Answer

Q74) Under short term financing interest cost is less. Show Answer

Q75) Under conservative approach requirement of funds is met from short term source. Show Answer

Q76) Factoring is financing of debtors. Show Answer

Q77) Factoring is borrowing from banks. Show Answer

Q78) Factoring involves discounting of B/E. Show Answer

Q79) Factoring involves collection from debtors by a factor. Show Answer

Q80) Factor charges commission for his services. Show Answer

Q81) Factoring increases administrative cost. Show Answer