MCQ Based Questions on Class 11 Business studies for chapter-8 Sources of Business Finance
Find below MCQ Based Questions on Class 11 Business studies for chapter-8 Sources of Business Finance all the MCQ questions are explained with correct answers and explanations. To check the correct answer click on the answer.
Find MCQ questions for class 11 Business studies-8 Sources of Business Finance
Business Studies - MCQ on Sources of Business Finance
Class XI
Q. 1. Equity shareholders are called
I. Owners of the company
II. Partners of the company
III. Executives of the company
IV. Guardian of the company
Answer:
I. Owners of the company
Explanation: They are Owners of the shares of the company
Q. 2. The term ‘redeemable’ is used for
I. Preference shares
II. Commercial paper
III. Equity shares
IV. Public deposits
Answer:
I.Preference shares
Explanation: Redeemable preference shares which will be repaid after a certain date
Q. 3. Funds required for purchasing current assets is an example of
I. Fixed capital requirement
II. Plugging back of profits
III. Working capital requirement
IV. Lease financing
Answer:
III. Working capital requirement The financial requirements of an enterprise do not end with the procurement of fixed assets.
Q. 4. ADRs are issued in
I. Canada
II. China
III. India
IV. USA
Answer:
.IV. USA
Explanation: The depository receipts issued by a company in the USA are known as American Depository Receipts.
Q. 5. Public deposits are the deposits that are raised directly from
I. The public
II. The directors
III. The auditors
IV. The owners
Answer:
I. The public
Explanation: Public deposits are raised from public
Q. 6. Under the lease agreement, the lessee gets the right to
I. Share profits earned
II. Participate in the by the lesser management of the Organization
III. Use the asset for a Specified period
IV. Sell the assets
Answer:
III.Use the asset for a Specified period
Explanation: A lease is a contractual agreement whereby the owner of an asset (lessor) grants the right to use the asset to the other party (lessee).
The lessor charges a periodic payment for renting of an asset for some specified period called lease rent.
Q. 7. Debentures represent
I. Fixed capital of the company
II. Permanent capital of the Company
III. Fluctuating capital of the Company
IV. Loan capital of the company
Answer:
Iv. Loan capital of the company
Explanation: Debenture means loan for the company which it takes from the public
Q. 8. Under the factoring arrangement, the factor
I. Produces and distributes
II. Makes the payment on The goods or services behalf of the client
III. Collects the client’s debt
IV. Transfer the goods from or account receivables one place to another
Answer:
III.Collects the client’s debt
Explanation: Factoring has emerged as a popular source of short-term funds in recent years. It is a financial service whereby the factor is responsible for all credit control and debt collection from the buyer and provides protection against any bad-debt losses to the firm.
Q. 9. The maturity period of a commercial paper usually ranges from
I. 20 to 40 days
II. 60 to 90 days
III. 120 to 365 days
IV. 90 to 364 days
Answer:
IV.90 to 364 days
Explanation: It is an unsecured promissory note issued by a firm to raise funds for a short period The maturity period of commercial paper usually ranges from 90 days to 364 days. Being unsecured, only firms having good credit rating can issue the CP and its regulation comes under the purview of the Reserve Bank of India.
Q. 10. Internal sources of capital are those that are
I. Generated through outsiders
II. Generated through loans such as suppliers from commercial banks
III. Generated through issue Of shares
IV. Generated within the business
Answer:
IV.Generated within the business
Explanation: Internal sources of funds are those that are generated from within the business
Q. 11. Over Capitalization is the result of
I. Under estimating the rate of capitalization
II. Payment of excessive amount of goodwill.
III. Raising more money than can be profitably raised.
IV. All of the above.
Answer:
: I.All of the above.
Explanation: Over capitalization means collecting extra fund that it needs.
Q. 12. Under Capitalization refers to
I. Increase in the market value of the share
II. Payment of dividend at low cost
III. Share holders defaulting in payment of call money
IV. Actual capitalization being lower that proper capitalization
Answer:
IV. Actual capitalization being lowers that proper capitalization
Explanation: Under capitalization means collecting less funds that it needs
Q. 13: What type of Debenture Company cannot issue.
I. Registered debenture
II. Bearer debenture
III. Participating Debentures
IV. Irredeemable Debentures
Answer:
III.Participating Debentures
Explanation: Preference shares which have a right to participate in the further surplus of a company shares which after dividend at a certain rate has been paid on equity shares are called participating preference shares
Q. 14: A profit which is not likely to contribute to the current profit, Should be financed by
I. Debenture
II. Public deposit
III. Preference share capital
IV. Equity Capital
Answer:
IV.Equity Capital
Explanation: It is collected for long term purpose and it for particular reason which may benefit the company in long run
Q. 15: Identify the non redeemable security among the following.
I. Debenture
II. Public deposit
III. Preference share capital
IV. Equity Shares
Answer:
IV.Equity Shares
Explanation: These securities are not redeemable because they are not paid back.
Q. 16: Redeemable Shares could be
I. Cumulative
II. Non- Cumulative
III. Participating
IV. All of them
Answer:
: IV.All of them
Explanation: Redeemable shares could be any as they will be redeemed back.
Q. 17: Preference share carries a preference right in respect of.
I. Dividend
II. Repayment of Capital
III. Both
IV. None
Answer:
:III. Both
Explanation: Preference right is carried in Dividend as well as Repayment of Capital
Q. 18: Capital gearing means
I. Working Capital
II. Trading on equity
III. Watered Capital
IV. Fixation of proper ratio between two more type securities.
Answer:
IV.Fixation of proper ratio between two more type securities.
Explanation: When a company fixes to raise funds from different sources than it fixes a ratio between securities which is called capital gearing
Q. 19: the Term capitalization is used with ref to
I. Partnership
II. joint stock company
III. co-operative society
IV. None of the above
Answer:
II.Joint Stock Companies
Explanation: Shares can be issued only by a joint stock company.
Q. 20: The rate of dividend is not fixed in
I. Debenture
II. Public deposit
III. Preference share capital
IV. Equity Shares
Answer:
II.Public Deposit
Explanation: Rate of interest on deposits is usually higher than that offered by banks and other financial institutions but it is not fixed
Q. 21: share warrants may be issued by
I. Public Limited Companies
II. Private limited Companies
III. Companies Limited By guarantee
IV. All of the above
Answer:
I.Public limited company
Explanation: Share warrants are issued only by Public limited company
Q. 22: Premium on issue of shares can be used for
I. Distributing profit
II. Issue of bonus shares
III. Paying the amount of directors
IV. None of these
Answer:
II. Issue of bonus shares
Explanation: The premium may be used to issue bonus share
Q. 23: Balance of forfeited Shares is
I. Revenue reserve
II. Capital reserve
III. Reserve
IV. None of these
Answer:
II.Capital reserve
Explanation: Capital reserve is the balance offorfeited Shares
Q. 24: Profit can be fraudulently inflated by
I. suppression of sales returns
II. treating capital expenditure as revenue
III. Over estimation of liabilities
IV. Omission of pre paid expenses
Answer:
: II.treating capital expenditure as revenue
Explanation: When capital expenditure s treated as revenue than a company can show profit
Q. 25: Bonus share can be issued by company
I. Out of the revenue created by revaluation of fixed asset.
II. Out of Share Premium not collected in cash
III. Without any provision for it in the AOA built out of the company
IV. Out of free reserves built out of genuine profit
Answer:
IV Out of free reserves built out of genuine profit
Explanation: Bonus share can be issued by company from the profits which are not used
Q. 26.Debenture holders are known as
I. Debtors
II. Creditors
III. Share holders
IV. Partners
Answer:
II.Creditors
Explanation They have given loan to the company so they are basically creditors
Q. 27.Public deposits can be raised for a maximum period of
I. One year
II. Two years
III. Three years
IV. Four Years
Answer:
III.Three years
Explanation The maximum period for public deposits Three years
Q. 28.Risk capital is provided by
I. Debenture shareholder
II. Equity shareholder
III. Preference shareholder
IV. Fixed Capital
Answer:
II. Equity shareholder
Explanation Risk capital is a contribution of equity shareholder
Q. 29 Financial Disintermediation results in large
I. Access to financial institutions
II. Participation of foreign financial institutions
III. Free based income
IV. Securities related income
Answer:
III.Free based income
ExplanationFree based can be earned by Financial Disintermediation
Q. 30: Identify the source of finance that does not pose a burden on a company’s finances
I. Debenture
II. Public deposit
III. Loan from Financial Institution
IV. Retained earnings
Answer:
IV.Retained earnings
Explanation: Retained earning is ploughing back the profits for reinvestment
Q. 31.: Commercial papers represent a new financial instrument issued for the purpose of
I. Project financing
II. Working capital
III. Leasing of plant and equipments
IV. Imports of capital goods
Answer:
II.Working capital
Explanation: It is an unsecured promissory note issued by a firm to raise funds for a short period The maturity period of commercial paper usually ranges from 90 days to 364 days.
Q. 32.Equity linked debt securities converted into equity after a specified period
I. ADR
II. GDR
III. FCCB
IV. None
Answer:
III.FCCB
Explanation: Foreign currency convertible bonds a holder of FCCB has the option of
either converting them into equity shares at a predetermined price or exchange rate, or retaining the bonds.
Q. 33.An international source of finance for Indian companies is
I. Euro Issue
II. Dollar Issue
III. Rupee Issue
IV. Yen Issue
Answer:
I.Euro Issue
Explanation: Securities are issued in foreign currency and are offered for sale internationally
Q. 34.Trade credit refers to
I. Credit by bank
II. Creditor of trade
III. Extended one trader to another for purchasing goods or services
IV. None
Answer:
III. Extended one trader to another for purchasing goods or services
Explanation: Trade credit facilitates the purchase of supplies on credit. The terms of trade credit vary from one industry to another and are specified on the invoice.
Q. 35.Fixed charges on the assts of the company are called
I. Secured Debentures
II. Unsecured debenture
III. Redeemable debenture
IV. Irredeemable debenture
Answer:
I.Secured Debentures
Explanation: Secured debentures are such which create a charge on the assets of the company.
Q. 36.The source f medium term finance is
I. Trade credit
II. Commercial banks
III. Financial institution
IV. Customer advance
Answer:
III. Financial institution
Explanation: It is raised for period d more than one year and less than five years for launchinga new project.
Q. 37.GDR is
I. Global Depository Receipt
II. Great depository receipt
III. Global Depository Reserve
IV. None
Answer:
I.Global Depository Receipt
GDR is a negotiable instrument and can be traded freely like any other security.
Q. 38.What has been set by government for the rehabilitation of sick units
I. IIDI
II. IIBI
III. IICI
IV. IIAI
Answer:
II. IIBI
Explanation: Indian investment bank of India was set to support sick units