CUET Entrepreneurship-Chapter-Management of Finance

  • Board
    CBSE
  • Textbook
    NCERT
  • Class
    Class 12
  • Subject
    Entrepreneurship
  • Chapter
    CUET Entrepreneurship-Chapter-Management of Finance
  • Chapter Name
    Management of Finance
  • Category
    CUET (Common University Entrance Test) UG

Important MCQ Questions on CUET Entrepreneurship-Chapter-Management of Finance with Detailed explanation

HT having an expert teacher prepared the most important MCQ Questions on CUET Entrepreneurship-Chapter-Management of Finance with Detailed explanations. All the concepts of Entrepreneurship in the syllabus of CUET are covered with coverage of the entire syllabus. This page is prepared for Entrepreneurship-Chapter-Management of Finance and covers all important topics of the competitive exam CUET for domain subject test. Check out MCQ Based questions for CUET Entrepreneurship uploaded by the HT experts. 

MCQ Questions for CUET Entrepreneurship-Chapter-Management of Finance Set-1

Entrepreneurship - MCQ on Management of Finance

Class XII

Q.1. Venture capital investments are in the form of

a. fixed deposits.

b. debentures.

c. bonds.

d. equity instruments.

answer:

(a)

Exp: Generally the investments are in equity instruments in case of venture capital and made in those enterprises which are new and using new technology of production to produce new products.

Q.2. Investor’s return in case of venture capital is taxed as

a. ordinary income.

b. business income.

c. capital gain.

d. income from other sources.

answer:

(c)

Exp: Investor’s return is taxed as capital gain rather than ordinary income or any other income under venture capital. It is a tax penalty imposed on productivity, investment, and capital accumulation.

Q.3. One of the feature of lease financing is that

a. lessee bears risk of obsolescence.

b. lessee can acquire asset with lower

investment.

c. lessee may become the owner of asset.

d. it is risky.

answer:

(b)

Exp: Under lease financing, lessee can acquire asset with a lower investment and the risk of obsolescence is borne by lessor. Leasing would help in cases where the costs of the equipments are high and the depreciation is also very high.

Q.4. A lessee under the lease agreement gets the right to

a. participate in the management of the company.

b. share profits earned by the lessor.

c. use the asset for a specified period.

d. sell the asset.

answer:

(c)

Exp: A lease is a contractual agreement between two parties i.e. one who is the owner (lessor) of the asset and the other who takes the asset on rent (lessee) for a specific period. It does not transfers the title of asset to the lessee, who is only allowed to use it for a certain period.

Q.5. A specialised venture capital company in India is

a. IDBI Risk Finance Ltd.

b. India Investment Fund.

c. IFCI Ventures Ltd.

d. IIBI Venture Finance Ltd.

answer:

(b)

Exp: India Investment Fund set up by ANZ Grindlays Bank is one of the specialised venture capital companies in India.

Q.6. Most likely feature of venture capital funding is that it is

a. less risky.

b. taxed as business income.

c. highly liquid.

d. highly illiquid.

answer:

(a)

Exp: Venture capital investment is highly illiquid as it is not subject to repayment on demand. Venture capital means committing capital to an enterprise that has risk and adventure and thus refers to long term commitment.

Q.7. Company lacking sufficient funds should opt for

a. factoring.

b. Leasing.

c. private money lenders.

d. public deposits.

answer:

(b)

Exp: Lease finance provides a good means of modernisation and diversification to the small and medium businessmen not having adequate funds to buy the assets required.

Q.8. While starting a new venture, an entrepreneur should have a fair idea of

a. business rivals.

c. actual profits.

c. market trends.

d. estimated profits.

answer:

(c)

Exp: When an entrepreneur is going to start a new venture, he must have a fair idea about sources of cash generation, market trends, asset management concepts etc. As, these determine the success of an enterprise in the future.

Q.9. A projected profit and loss account under consideration is referred as

a. finance map.

b. budget.

c. financial plan.

d. financial statement.

answer:

(b)

Exp: A budget is basically a reflection of the intentions of the management about its objectives, management techniques, investments, modes of production and sale, strategies of marketing that would lead to realization of the proposed profits. It is formulated for a certain period of time.

Q.10. A projection of the entire scheme of trading activities is termed as

a. operational budget.

b. master budget.

c. cash budget.

d. capital expenditure budget.

answer:

(a)

Exp: Operational budget is a projected estimation of all trading activities of an enterprise, which includes sales, cost of sales, overheads in the management of the enterprise as well as profit. This budget helps the entrepreneur to scheme his operations according to a preset flowchart.

Q.11. A financial plan reflecting the expenditure on capital investments during a year is termed as

a. operational budget.

b. cash budget.

c. production budget.

d. capital expenditure budget.

answer:

(a)

Exp: This budget presents the future capital expenditure, i.e. the investment made in machines, building, etc. Capital expenditure budget is related to the expenditure which is very high and has a long gestation period to yield any income.

Q.12. Budgeting helps an enterprise in

a. decision making.

b. executing the activities.

c. achieving the targets.

d. increasing sales.

answer:

(a)

Exp: Budgeting helps an enterprise in its decision making process. One of the main objectives of any enterprise is to realize certain amount of profit to meet the future needs of the entrepreneur and for the growth of the enterprise. For achieving these goals, appropriate decision making is crucial.

Q.13. A sales budget is usually drafted for a period of

a. one month.

b. one month to six months.

c. six months to a year.

d. one to two year.

answer:

(c)

Exp: A sales budget is the basis for all other budgets and therefore, special care is needed while preparing it. It is a detailed plan of sales which gives the details about the estimated sales within a definite period of time. It is usually formulated for a period of six months or a year.

Q.14. Production budget is based upon

a. overheads budget.

b. raw material budget.

c. capital expenditure budget.

d. sales budget.

answer:

(a)

Exp: Production budget determines the quantity of different products to be produced and their time of production. The main purpose of preparing this budget is to strike a balance among sales, production and their time of production.

Q.15. For the purpose of routine management of the enterprise as well as to sustain its operations

a. capital expenditure budgeting is required.

b. cash flow budgeting is required.

c. sales budgeting is required.

d. operational budgeting is required.

answer:

(b)

Exp: The cash flow is an important criterion for the routine management of the enterprise and to sustain its operations. This budgeting process will have to take in to account the operational as well as capital expenditure during the given time so that the cash flow can be properly assessed an utilized.

Q.16. Secured loans are raised against

a. assets.

b. amount of sales.

c. intangible assets.

d. past records of the enterprise.

answer:

(a)

Exp: The secured loans are usually given on securities pledges or hypothecated to the bank. Loans can be raised against the assets, stocks and other market securities.

Entrepreneurship - MCQ on Management of Finance

Class XII

Q.1. The most important asset for a start up entrepreneur is

a. debtors.

b. cash.

c. inventory.

d. market securities.

answer:

(b)

Exp: Cash is the most important asset for starting up a business. It is considered to be the life blood of the business. It provides support system to the enterprise.

Q.2. Deep insight into market & study of the sales trends enables an entrepreneur to predict

a. cash flow.

b. incentives.

c. awards.

d. technology.

answer:

(a)

Exp: The study of market dynamics enables an entrepreneur to forecast sales & consequently forecast cash flow from the revenue arising out of sales.

Q.3. One of the important & regular sources of cash inflow is

a. incentives.

b. loans.

c. government aid.

d. sales.

answer:

(d)

Exp: Sales give rise to regular revenue, which is received in the form of cash.

Q.4. Planning inventory in a careful manner necessitates

a. buying stock in large quantities.

b. procurement of stock in planned continuous manner.

c. maintaining huge stock.

d. buying minimum possible stock.

answer:

(b)

Exp: Buying stock in large quantities or maintaining a huge stock will unnecessarily block working capital and if stock is kept at its minimum level, then, there will be a constant fear of shortage of stock, so procurement has to be done in a planned manner.

Q.5. An asset which could be a constant source of finance is known as

a. inventory of finished goods.

b. inventory of raw material.

c. marketable securities.

d. stock of spare parts.

answer:

(a)

Exp: Inventory of finished goods is the only asset which could provide supply of cash on constant basis. All the other assets mentioned could also be a part of cash supplying assets but they can’t provide a constant flow.

Q.6. A suitable location for the sale of consumables would be

a. industrial area.

b) location with high population density.

c) agricultural area. d)international market.

answer:

(b)

Exp: Consumables are directly used by the population, so if they are sold in close proximity of population, they will definitely provide high revenue and cash flow.

Q.7. The best possible way to procure an equipment for a short time period is

a. buying on cash basis.

b. buying on hire purchase basis.

c. buying on credit.

d. leasing.

answer:

(d)

Exp: If equipment is required for a short period or for a specific period of operation, then, leasing is the best option to procure it. Other modes will unnecessarily impose financial burden on an entrepreneur and will also block his funds.

Q.8. Equity financing refers to

a. finance invested in other companies.

b. capital invested in an enterprise by its owner.

c. procuring cash through debt.

d. investment in debentures.

answer:

(b)

Exp: Equity funds refer to owner’s funds invested in an enterprise. These funds are also known as ownership securities or capital stock.

Q.9. Mode of investment/financing through which ownership is provided to investor is known as

a. debentures.

b. public deposit.

c. shares.

d. loans.

answer:

(c)

Exp: Apart from bearing risks, shares provide permanent capital to the enterprise. So, share holders are known as the owners of the company.

Q.10. The budget which is a projection of the entire scheme of trading activities is known as

a. trading budget.

b. operational budget.

c. capital expenditure budget.

d. revenue budget.

answer:

(b)

Exp: Operational budget forecasts about all kinds of trading/operational activities as sales, cost of sales, overheads and profit.

Q.11. The budget which reflects the expenditure to be incurred on capital investments is known as

a. trading budget.

b. revenue budget.

c. operational budget.

d. capital expenditure budget.

answer:

(d)

Exp: Capital expenditure budget reflects the amount of expenditure to be incurred on capital investments or fixed assets, such as land & buildings, equipments, machinery etc.

Q.12. The statement which shows projected profit & loss, pertaining to trading activities is known as

a. profit & loss a/c .

b. trading a/c.

c. balance sheet.

d. budget.

answer:

(d)

Exp: Budget is a type of plan, framed in numerical form that shows projected/estimated profit & loss that would arise as a result of trading activities.

Q.13. Capital invested by the owners of an enterprise is known as

a. equity financing.

b. personal financing.

c. public financing.

d. debt financing.

answer:

(a)

Exp: Equity financing refers to the amount invested by the owners of an enterprise in the business. It is not refunded during the life span of the enterprise.

Q.14. Analysis of past trends of sale, in conjunction with understanding of market trends, are essential elements of

a. cash flow budget.

b. overhead budgeting.

c. operational budget.

d. sales budget.

answer:

(d)

Exp: Trend of sales and market dynamics provide sound basis for sales budget. These two ingredients provide an insight to an entrepreneur to predict future trend of sales with accuracy.

Q.15. An entrepreneur wants to ensure flawless supply of cash flow. To ensure this he would rely upon

a. overheads budgeting.

b. sales budget.

c. cash flow budget.

d. operational budget.

answer:

(c)

Exp: Cash flow budget ensures smooth flow of cash. It ensures sufficient cash supply for operational & capital expenditure.

MCQ Questions for CUET Entrepreneurship-Chapter-Management of Finance Set-2

Q.16. Initial capital used to start a business is known as

a. debt financing.

b. seed capital.

c. personal financing.

d. public financing.

answer:

(b)

Exp: Seed capital refers to the funds necessary to start a business. This money is used to conduct preliminary operations, such as market research, product development etc.

Q.17. Understanding the market sales report helps an entrepreneur to frame

a. cash flow budget.

b. sales budget.

c. overhead budget.

d. operational budget.

answer:

(b)

Exp: Market sales report describes the likes and dislikes of the customers and the changing aspirations in the market. This helps in re-shaping the product & planning in advance for sales budget.

Q.18. Loan procured by a small enterprise from a commercial bank is categorised as

a. debt financing.

b. equity financing.

c. personal financing.

d. public financing.

answer:

(a)

Exp: Commercial banks provide unsecured & secured loans to finance the requirements of small enterprises.

Q.19. Assistance from the specialised financial institutions like IDBI, IRS, SIDBI comes under the category of

a. debt financing.

b) public financing.

c) government support.

d. equity financing.

answer:

(c)

Exp: The central & the state governments have taken a large number of steps to motivate the entrepreneurs. Through these specialised institutions, government supports the small sector entrepreneurs.

Q.20. While deciding about the location of manufacturing unit or outlets, an entrepreneur has to take important decision about

a. infrastructural issues.

b. inventory.

c. sales.

d. financing.

answer:

(a)

Exp: The matters relating to real estate form the foundation of infrastructural issues. These decisions are taken, keeping in mind, the type of product being manufactured in an enterprise.

Q.21. When an entrepreneur thinks about the equipments to be purchased, leased or contracted, then he decides about

a. infrastructure issues.

b. management of equipments.

c. plant & equipments.

d. asset management.

answer:

(b)

Exp: Accessing equipments is crucial for the entrepreneur. A few equipments can be purchased, subject to the availability of cash & rest of the equipments can be procured through lease or contract, depending upon their utility or periodicity of use.

Q.22. The quantum of unsecured loans as compared to secured loans is

a. smaller.

b. larger.

c. equal.

d. double.

answer:

(a)

Exp: Since the amount of loan is unsecured, no financial institution would like to risk a larger amount on this. Therefore, the amount of unsecured loans is always smaller than the secured loans.

Q.23. The period for long term loan is generally specified as

a. 0-1yr.

b. 1yr to 3 yrs.

c. 3yrs to 10yrs.

d. 2yrs to 5 yrs.

answer:

(c)

Exp: Long term loans spread over a period of 3 yrs to 10yrs. These loans are provided for renovation, purchase of equipments etc.

Q.24. Lack of sensitivity in planning, management and realisation of profit will lead to

a. less waste of time.

b. adverse situations.

c. less waste of money.

d. reverse situations.

answer:

(b)

Exp: Goodplanning & proper management provides a sound basis for existence & growth of an enterprise. Careless execution of planning & management may put a business house in danger.

Q.25. Understanding the trend of orders helps an entrepreneur to prepare

a. production plan.

b. strategic plan.

c. budget.

d. operational budget.

answer:

(a)

Exp: By understanding the trend of orders an entrepreneur can prepare production plan. It helps him to mobilise raw materials and resources to meet the needs of the sales.

Q.26. Non repayable amount in a business is known as

a. public financing.

b. equity financing.

c. debt financing.

d. government support.

answer:

(b)

Exp: Capital invested in an enterprise by its owners is known as equity financing. It is not repaid to the investors in the normal course of business. It represents the risk capital staked by the owners for earning profits.

Q.27. Obtaining & managing money, assets management and effective use of resources are the vital ingredients of

a. planning.

b. management.

c. asset management.

d. financing.

answer:

(d)

Exp: Apart from obtaining & managing money, financing also includes assets management, ensures effective use of the resources and high productivity and stability.

Q.28. Immediate flow of cash is ensured, if sales are materialised through

a. cash.

b. credit.

c. hire purchase.

d. dealers.

answer:

(a)

Exp: Sales result in the inflow of cash. On cash basis sales, a customer is required to pay instant cash to acquire the title on goods purchased.

Q.29. More credit purchases as compared to credit sales gives rise to

a. cash inflow.

b. cash outflow.

c. no flow of cash.

d. cash in hand.

answer:

(c)

Exp: Credit sales & credit purchases are not done in cash, so, cash flow will not be affected at all.

Q.30. Rigidity & lack of flexibility on sales can

a. boost up the sales.

b. retard the sales.

c. provide competitor edge.

d. increase market share.

answer:

(b)

Exp: Customer base can only be raised through flexibility in sales policies. Inflexibility may ensure cash flows but higher & constant cash flows are only possible, if there is sufficient flexibility to accommodate different types of sales.

Q.31. The period for short term loan is generally specified as

a. 5yrs to 10yrs.

b. a few months to 1yr.

c. 1yr to 3yrs.

d. 3yrs to 8yrs.

answer:

(b)

Exp: Short term loans are generally required for operating activities of an enterprise. Since these loans are required for operational & routine activities, their term does not go beyond one year.

Q.32. Venture capital is generally provided by the

a. owner.

b. government.

c. financial institutions.

d. investors.

answer:

(d)

Exp: It is provided by the investors. These investors do not interfere in management of the enterprise.

Q.33. The main focus of the investors, who provide venture capital to the business, is

a. sales generation.

b. policy framing.

c. more production.

d. increasing credibility & profits of the enterprise.

answer:

(d)

Exp: Theinvestors who provide venture capital to the enterprise do not meddle with the affairs of the management. They are more or less non-working partners. So they keep their attention only towards increasing credibility & profits of the enterprise.

Q.34. Venture capital industry is an organised form of

a. capital investment industry.

b. investors operations.

c. debt capital industry.

d. government support step.

answer:

(a)

Exp: Venture capital industry is a budding industry. Here stakeholders invest in an industry where they have special insight.

Q.35. An alternate form of equity financing is known as

a. debt capital.

b. venture capital.

c. issue of shares.

d. capital investment.

answer:

(b)

Exp: The capital, provided by an investor who does not participate in management but works for increasing credibility & profits is known as venture capital. Here the investor also bears the risk on money invested as the owner.

Q.36. If the requirement of finance falls short after using personal finances & government support system, entrepreneurs resort to

a. public financing.

b. private financing.

c. market strategies.

d. policy formation.

answer:

(a)

Exp: Entrepreneurs resort to public financing through the issue of shares or debentures. Public financing provides image & credibility to the company.

Q.37. To enlarge the scope for credits & market strategies, an entrepreneur resorts to

a. government support.

b. public financing.

c. personal financing.

d. loans.

answer:

(b)

Exp: Public financing provides image & credibility to the company. Marketability of the shares provides value to the company.

Q.38. Performance of the company can be assessed through

a. competitor’s product.

b. government support.

c. budget & estimated profits.

d. marketability of the securities.

answer:

(d)

Exp: The value at which the securities can be marketed depicts the performance of the company. If the company performs well, the rate of thesecurities will go high & vice versa.

Q.39. Once a company has gone public, it has to follow the rules & regulations of the

a. commercial banks.

b. financial institutions.

c. Securities & Exchange Board of India.

d. government.

answer:

(c)

Exp: Securities & Exchange Board of India provides guidelines & govern the companies which go public by issuing securities (shares & debentures).

Q.40. Once a company issues securities, it is its responsibility towards the shareholders to provide them with

a. budget.

b. audited accounts.

c. dividend.

d. marketable rate of shares.

answer:

(b)

Exp: Shareholders can have access on audited accounts & on reports of performance of the company, once it goes public by issuing securities.

Q.41. Rules & regulations of the Companies Act govern the companies, which

a. take government support.

b. take loans from the commercial banks.

c. issue securities.

d. use venture capital.

answer:

(c)

Exp: Companies are bound to follow the guidelines provided by the Companies Act, incase they have issued securities for procuring public finance. Since the investments from general public are on stake, the Companies Act expects the companies to follow certain formalities, which are in the benefit of the stakeholders.

Q.42. The source of initial investment capital is

a. government.

b. personal financing.

c. public financing.

d. debt financing.

answer:

(b)

Exp: Through personal cash or conversion of assets into cash, an entrepreneur provides initial capital to the enterprise. Apart from cash, he also mobilises personal resources for enterprise development.

Q.43. Under personal financing, after exhausting his personal resources, an entrepreneur mobilises resources from

a. government.

b. equity financing.

c. family, friends & relatives.

d. debt financing.

answer:

(c)

Exp: An entrepreneur also mobilises resources from family members, near and dear ones before opting for any other solution like public financing or debt financing.

Q.44. The support from family members and near & dear ones is known as

a. venture capital.

b. informal assistance.

c. commercial assistance.

d. human assistance.

answer:

(b)

Exp: Since this help is provided without undergoing legal formalities or creating business liabilities, it is known as informal assistance.

Q.45. For development of an enterprise, when an entrepreneur provides assets like car, furniture etc., then it is known as

a. equity financing.

b. asset financing.

c. personal financing.

d. personal assets.

answer:

(c)

Exp: Apart from cash, when an entrepreneur provides his personal assets, it is known as mobilising personal resources, which come under personal financing.

Q.46. One of the benefits of mobilising resources from family and near & dear ones is that

a. they give free advices.

b. they may not have legal hold on enterprise.

c. they share losses.

d. they maintain accounts.

answer:

(b)

Exp: Since this sort of assistance is known as informal assistance, the people who provide this may not have legal hold on enterprise. So, this kind of assistance gives enough space to an entrepreneur to execute his business ideas without interference.

Q.47. The investment, which is non repayable, is known as

a. informal assistance.

b. equity financing.

c. formal assistance .

d. government support.

answer:

(b)

Exp: Capital invested in an enterprise by its owners is non repayable during its life time. It is also known as equity financing or risk capital.

Q.48. Leasing is advisable for the equipments, where

a. cost & depreciation both are high.

b. cost is low & depreciation is also low.

c. cost is low but depreciation is high.

d. cost is high but depreciation is low.

answer:

(a)

Exp: Leasing is advisable, where cost & depreciation both are high. Apart from this factor, cost of lease & maintainability of equipment should also be considered for deciding about the equipments to be leased.

Q.49. The process of securing authority to use equipment by way of a rental agreement for a specified period of time is known as

a. hire purchase.

b. rented equipment.

c. leasing.

d. temporary equipment.

answer:

(a)

Exp: In leasing, an entrepreneur enters into a contract to utilise equipment for a specified period of time, without the responsibility of ownership. This type of arrangement is done, when the need for that equipment is only temporary.