CUET Entrepreneurship-Chapter-Short, medium and long

  • Board
    CBSE
  • Textbook
    NCERT
  • Class
    Class 12
  • Subject
    Entrepreneurship
  • Chapter
    CUET Entrepreneurship-Chapter-Short, medium and long
  • Chapter Name
    Short, medium and long
  • Category
    CUET (Common University Entrance Test) UG

Important MCQ Questions on CUET Entrepreneurship-Chapter-Short, medium and long with Detailed explanation

HT has an expert teacher who prepared the most important MCQ Questions on CUET Entrepreneurship-Chapter-Short, medium, and long 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-Short, medium, and long 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-Short, medium, and long Set-1

Entrepreneurship - MCQ on Short, medium and long

Class XII

Q.1. Capital invested in buying of those business asset which are used for a long period are known as

a. long term capital.

b. fixed capital.

c. working capital.

d. medium tern capital.

answer:

(b)

Exp: Fixed capital refers to the capital that is invested in the buying of those business assets which are used for a long period in the business such as, furniture, land, building, plant and machinery etc.

Q.2. Capital needed for fulfilling day to day requirements of an enterprise is known as

a. short term capital.

b. long term capital.

c. fixed capital.

d. working capital.

answer:

(a)

Exp: Working capital refers to the capital needed for fulfilling the everyday requirements of the enterprise such as raw materials, wages of workers, maintenance charges etc.

Q.3. Working capital is also known as

a. long term capital.

b. fixed capital.

c. circulating capital.

d. owners capital.

answer:

(c)

Exp: As working capital remains in active circulation in an enterprise for fulfilling its routine requirements. Thus, is known as circulating capital.

Q.4. Working capital requirements of an enterprise depends upon the enterprise’s

a. size of the business.

b. level of current liabilities.

c. efficiency of employees.

d. sources of finance.

answer:

(a)

Exp: The size of the business may be one of the determining factors of the working capital requirements of an enterprise. The larger the size of the firm, more can be its working capital requirements.

Q.5. The time required for converting raw materials into finished goods is known as

a. product life cycle.

b. operating cycle.

c. business cycle.

d. economic cycle.

answer:

(b)

Exp: The time period needed for the conversion of raw materials into the finished products ready to be sold is termed as operating cycle. The length of the operating cycle also determines the working capital requirements of an enterprise.

Q.6. An entrepreneur in order to speedup the cash flow of the enterprise aims at

a. increasing the length of operating cycle.

b. selling goods only in cash.

c. managing the business cycle.

d. shortening the length of operating cycle.

answer:

(a)

Exp: As an enterprise can realize cash only when the finished goods are sold or payment is collected from the debtors, thus an efficient enterprise aims at maintaining a short operating cycle.

Q.7. If the credit period of an enterprise is longer then its working capital requirements

a. increase.

b. remain unaffected.

c. is insignificant.

d. decrease.

answer:

(a)

Exp: An enterprise sells goods on cash as well as on credit basis. So, when its major portion of sales is on credit basis then it would require more working capital. Moreove, if the credit period is longer, then the working capital requirements increase.

Q.8. If an enterprise’s sales turnover is high, its working capital requirement is

a. more.

b. huge.

c. less.

d. affected.

answer:

(c)

Exp: If the level of sales turnover of an enterprise is high, then it realizes cash from sales faster. This enables it to maintain a low working capital as the amount available from sales of goods can be invested back into the enterprise.

Q.9. If the inventory policy of an enterprise is to maintain a large inventory then

a. less working capital is needed.

b. working capital requirements are not affected.

c. more long term capital is required.

d. more working capital is required.

answer:

(a)

Exp: If an enterprise maintains a large stock of raw materials, stock or inventory then it would require maintaining a higher level of working capital.

Q.10. Assets like cash, closing stock, bills receivable are

a. fictitious assets.

b. current assets.

c. fixed assets.

d. quick assets.

answer:

(b)

Exp: Current assets are those assets of the business which are kept temporarily for resale or for converting into cash. These assts are likely to be realized within a period of one year or during the normal operating cycle.

Q.11. In case of efficient management of current assets, investment in working capital is

a. huge.

b. less.

c. moderate

d. more.

answer:

(b)

Exp: An efficient management of current assets such as cash, stock, bills receivables etc. in an enterprise enables it to invest less into its working capital for carrying on the business.

Q.12. An increase in an enterprise’s tax liability may affect its

a. working capital.

b. sales turnover.

c. marketing.

d. credit policy.

answer:

(a)

Exp: It is very important for an enterprise to have adequate provisions for taxes as it affects its working capital directly. An enterprise has to meet the increased tax liability from its working capital. This increases its working capital requirements.

Q.13. Amount invested by the owner of the business is also known as

a. borrowed capital.

b. trade credit.

c. short term capital.

d. owner’s funds.

answer:

(a)

Exp: Owner’s capital or owner’s fund is the amount of capital invested by the owners of the companies. As, owner’s fund in a sole tradership form of organization refers to the capital invested by the owner or the sole trader of the company.

Q.14. In a sole tradership form of organisation the owner’s funds is referred to the

a. capital contributed by the sole trader and profit reinvested by him.

b. capital contributed by the partners plus profit reinvested.

c. capital raised through issue of shares and net reserves plus surplus.

d. capital borrowed by the entrepreneurs from financial institutions.

answer:

(a)

Exp: The amount of capital which is invested by the owner of the business is known as owner’s funds. In a sole tradership form of organisation this is referred to the contribution made by the sole trader as well as the profit reinvested by him.

Q.15. In a partnership firm, the owner’s funds is referred to the

a. capital raised through issue of shares plus net reserves and surplus.

b. capital contributed by the soletrader and profit reinvested by him.

c. capital borrowed by the entrepreneurs from the financial institutions

d. capital contributed by the partners and the profit reinvested.

answer:

(a)

Exp: The amount of capital which is invested by the owner of the business is known as owner’s funds. Thus, in a partnership form of organisation, owner’s capital is the capital which is contributed by the partners of the business, who are the owners of the business, and the profit reinvested by them in the enterprise.

Q.16. In a joint stock company, the owner’s capital is referred to the

a. capital borrowed by the entrepreneurs from the financial institutions.

b. capital contributed by the partners plus profit reinvested.

c. capital raised through the issue of shares as well as net reserves and surplus.

d. capital contributed by the sole trader and the profit reinvested by him.

answer:

(c)

Exp: The amount of capital which is invested by the owner of the business is known as owner’s funds. The owners in a joint stock company are its shareholders thus; the capital realised through issue of shares and the net reserves plus the surplus of the business form the owner’s capital.

Q.17. In an enterprise, the borrowed capital is referred to the

a. capital contributed by the sole trader and profit reinvested by him.

b. capital which is borrowed by the entrepreneurs from bank or other financial institutions etc.

c. capital raised through issue of shares plus net reserves and surplus.

d. capital contributed by the partners of the business and the profit reinvested.

answer:

(b)

Exp: When an enterprise raises funds by borrowing it from banks or other financial institutions etc. then such fund is referred as borrowed capital.

Q.18. Borrowed funds in a sole tradership enterprise refer to the

a. loans raised by the partner’s

b. issue of debentures

c. capital contributed by the sole trader

d. loans raised by the sole trader

answer:

(a)

Exp: Borrowed funds are the amount of capital borrowed by the entrepreneurs from banks or other financial institutions etc. In a sole tradership enterprise, the loans raised by the sole trader with or without security from friends, relatives and banks represent its borrowed capital.

Q.19. Borrowed capital in a partnership firm represent the

a. loans raised by the partner’s friends, relatives and banks.

b. capital issued through issue of shares plus net reserves and surplus.

c. capital contributed by the partners plus profit reinvested.

d. loans raised by the sole trader from friends, relatives and banks.

answer:

(a)

Exp: Borrowed funds are the amount of capital borrowed by the entrepreneurs from banks or other financial institutions etc. In a partnership form of organisation, the loans raised by the partner’s wife, friends, relatives and banks represent the enterprise’s borrowed capital.

Q.20. In a joint stock company, the borrowed capital is the

a. capital raised through issue of shares plus net reserves

b. capital borrowed from banks and other financial institutions

c. issued debenture, through credit or loan from financial institutions.

d. loans raised with or without security from friends, relatives and banks.

answer:

(c)

Exp: Borrowed funds in a joint stock company are referred to the issue of secured or unsecured debentures, through credit or loans from the banks or other financial institutions.

Q.21. Owner’s capital is a

a. long term capital.

b. medium term capital.

c. short term capital.

d. permanent capital.

answer:

(a)

Exp: The amount of capital which is invested by the owner of the business is known as owner’s funds. The owner’s funds are not refundable and it provides permanent capital which is used by the entrepreneur(s) for purchasing fixed assets and permanent working capital.

Q.22. Owner’s funds provide to an enterprise the

a. risk capital.

b. short term capital.

c. long term capital.

d. refundable capital.

Answer:

(a)

Exp: Owner’s capital provides risk capital to the enterprise. It is called risk capital because it is the owner who bears the risk in the business due to loss or low profit.

Q.23. In case of low growth prospects and profit earning capacity, it is difficult for an enterprise to

a. borrow capital.

b. raise long tern capital.

c. raise owner’s capital.

d. raise short term capital.

Answer:

(c)

Exp: The amount of capital which is invested by the owners of the enterprise is known as the owner’s capital. But, in case of lower growth prospects and profit earning capacity, it is difficult to raise owner’s funds.

Q.24. Capital invested in the business for a period of less than one year is referred as

a. short term capital.

b. medium term capital.

c. long term capital.

d. owner’s capital.

Answer:

(a)

Exp: Short term capital is required to hold stock of raw materials, work in progress and finished goods, to meet the manufacturing, administrative, selling and distribution expenses. It is invested in the business for a short period not exceeding one year.

Q.25. Short term capital can be raised through

a. term loans.

b. issue of debentures.

c. trade credit.

d. issue of equity shares.

Answer:

(c)

Exp: Short term capital is required to grant credit to the customers by keeping in mind better marketing and competition in the market. The trade credit ranges from one month to six months.

Q.26. Facility to customers to pay the amount due within the credit period allowed by them is referred as

a. cash credit.

b. trade credit.

c. advances from customers.

d. loans.

Answer:

(b)

Exp: The suppliers of raw materials, stores and spare parts, components and finished goods provide the facility to their customers to pay the amount due within the credit period allowed by them. This arrangement is known as the trade credit.

Q.27. The availability of trade credit depends upon

a. credit worthiness of the enterprise.

b. type of goods ordered.

c. elasticity of demand of goods

d. amount of goods ordered.

Answer:

(a)

Exp: The availability of trade credit depends upon a number of factors like prevailing economic conditions, credit worthiness of the enterprise, nature and size of the business, the credit policy of the suppliers etc.

Q.28. The amount of capital invested for a period of one year to five years is known as

a. owner’s capital.

b. short term capital

c. medium term capital.

d. long term capital.

Answer:

(c)

Exp: The medium term capital such as public deposits, loans from commercial banks etc. are required to meet expenses on heavy advertising, on renovation of building etc. These remain invested in the business for a period of more than one year but not exceeding five years.

Q.29. Arrangement by the bank to draw money time to time within a specified limit is termed as

a. trade credit.

b. bills of exchange.

c. loans.

d. cash credit.

Answer:

(a)

Exp: The facility of cash credit is provided by the bank to the entrepreneurs against the security of stock, marketable securities or instruments or personal security. The amount limit can be adjusted by the bank according to the requirements of the entrepreneurs and the banking provisions.

Q.30. Arrangement by the bank to overdraw from bank account within a specified limit is referred as

a. bank overdraft.

b. cash credit.

c. trade credit.

d. bills of exchange.

Answer:

(a)

Exp: Bank overdraft is one of the widely used source of short term capital. It is an arrangement between the bank and the entrepreneurs. Entrepreneurs are allowed to overdraw from their bank account within a specified limit, against the securities of assets or personal security.

MCQ Questions for CUET Entrepreneurship-Chapter-Short, medium, and long Set-2

Q.31. The term of bills of exchange may be

a. one month.

b. one to three months.

c. three to six months.

d. six months to one year.

Answer:

(a)

Exp: When the manufacturers, suppliers and traders sell the goods to the customers on credit, they generally draw bills of exchange on them who are required to accept them. The term of these bills of exchange may be between three to six months.

Q.32. An unconditional order to pay a certain sum of money to order of a person or to the bearer of the instrument is called as

a. bills of exchange.

b. letter of credit.

c. line of credit.

d. trade credit.

Answer:

(a)

Exp: When the manufacturers, suppliers and traders sell the goods to the customers on credit, they generally draw bills of exchange on them who are required to accept them. Discounting of bills of exchange is a very simple and popular source of short term finance.

Q.33. Act of selling bill of exchange to bank to obtain the payment before its maturity is called

a. transferring of bills of exchange.

b. writing the bills of exchange.

c. discounting of bill of exchange.

d. selling of bills of exchange.

Answer:

(c)

Exp: After the acceptance of bill of exchange by the customers, instead of holding the bill of exchange till the maturity date, the entrepreneurs prefer to get them discounted from the bank. For providing this facility the bank charges an interest from the entrepreneurs.

Q.34. The term of medium-term capital may be

a. between one to three years.

b. between one to five years.

c. between one to ten years.

d. between one to twenty five years.

Answer:

(b)

Exp: Medium term capital is the amount which is invested in the business for a period of more than one year but not exceeding five years.

Q.35. Capital invested in the business for more than 5 years but not exceeding 25 years is referred as

a. permanent capital.

b. owner’s capital.

c. long term capital.

d. medium term capital.

Answer:

(c)

Exp: long term capital is the amount of capital invested in the business for a period of twenty five years and not more than that. It is generally required to finance the permanent working capital.

Q.36. Long term capital is required for the purpose of

a. financing current assets.

b. meeting heavy advertising expenses.

c. renovating the enterprise building.

d. financing fixed assets.

Answer:

(a)

Exp: Long term capital which is invested in the business for a long period of time exceeding five years but not exceeding twenty five years is required in the business to finance the fixed assets such as the land, building, furniture, plant and machinery etc.

Q.37. Sources of long term capital are

a. advances from customers.

b. issue of debentures.

c. working capital loans.

d. bank overdraft.

Answer:

(b)

Exp: An enterprise raises its long term capital through the sources such as issue of equity shares, issue of preference shares, debentures, term loans and retained profits.

Q.38. The shares which participate in the profits of a company are called as

a. equity shares.

b. convertible preferential shares.

c. preferential shares.

d. non participating preferential shares.

Answer:

(a)

Exp: Equity shares are those shares which are not preference shares. Equity shares participate in the profits of an enterprise after all preferential rights have been satisfied. The specialty of equity shares is that the company is not bound to pay dividend or profit.

Q.39. The equity share capital provides the company with the

a. risk capital.

b. short term capital.

c. permanent capital.

d. medium term capital.

Answer:

(c)

Exp: The Company gets permanent capital in the form of equity share capital because in case of these shares, money is repaid by the company to the shareholders only on liquidation.

Q.40. The right to participate in the management affairs of the company is provided to the

a. preference shareholders.

b. term loan providers.

c. debenture holders.

d. equity shareholders.

Answer:

(a)

Exp: The equity shareholders are the virtual owners of the company. They have the right to participate in the management affairs of the company. In other words, they have the powers to control the company.

Q.41. Voting rights are provided to the

a. equity shareholders.

b. preference shareholders.

c. debenture holders.

d. lenders.

Answer:

(a)

Exp: The equity shareholders posses the right to exercise control over the company. They can participate in the management of the company and can exercise their voting rights in the annual general meeting of shareholders.

Q.42. In comparison to the cost of debt the cost of equity shares is

a. can not be compared.

b. equal.

c. higher.

d. lower.

Answer:

(c)

Exp: The floatation cost of new equity shares is higher than other sources of finance. The issue of equity shares is a long as well as cumbersome process involving adherence of several rules and regulations.

Q.43. Repayment of capital is certain during the life time of the company, in case of

a. equity shareholders.

b. debenture holders.

c. bond holders.

d. preference shareholders.

Answer:

(a)

Exp: The preference shares are redeemable during the life time of the company. Also, the preference shares are those shares which are entitled to a priority in the return of capital in the event of winding up of the company.

Q.44. Preference shares entitled to pay year’s dividend from the next year’s profit are known as

a. convertible preference shares.

b. cumulative preference shares.

c. participating preference shares.

d. non-participating preference shares.

Answer:

(b)

Exp: Cumulative shares are the shares on which year’s dividend will be paid from the next year’s profit, in case the company does not earn any profit during the year. Unless otherwise stated, preference shares are always deemed to be cumulative shares.

Q.45. The preferential right to receive the payment of dividend is enjoyed by

a. debenture holder.

b. lender.

c. equity shareholder.

d. preference shareholder.

Answer:

(a)

Exp: Preference shareholders are entitled to a priority in the payment of dividends at a fixed rate before any dividend is paid to equity shareholders.

Q.46. Preference shares redeemable in accordance with Companies Act. 1956 are known as

a. participating preference shares.

b. redeemable preference shares.

c. convertible preference shares.

d. non-redeemable shares.

Answer:

(b)

Exp: The redeemable preference shares are those shares which are redeemable in accordance with the provisions of sections 80 and 80 A of the companies Act. 1956. These shares are redeemable after a certain period of time by the company i.e. the company takes back them and pays their value to their shareholders.

Q.47. Preference shares carrying right to convert them into equity shares are termed as

a. convertible preference shares.

b. participating preference shares.

c. non-convertible preference shares.

d. cumulative preference shares.

Answer:

(a)

Exp: The holders of convertible preference shares have the right to convert their shares into equity shares within a certain time period. Unless stated otherwise, preference shares are always deemed to be non-convertible.

Q.48. Preference shares carrying additional rights along with the preferential rights are termed as

a. non-participating preference shares.

b. convertible preference shares.

c. participating preference shares.

d. cumulative preference shares.

Answer:

(c)

Exp: Participating preference shares are those shares which in addition to preferential rights, carry the rights to something over and above their fixed dividend and/ or to participate in the surplus assets left after the repayment of capital to equity shareholders on winding up of the company.

Q.49. A certificate of acceptance of loan given under the company’s stamp is known as

a. equity share.

b. term loan.

c. overdraft.

d. debenture.

Answer:

(a)

Exp: Palmer defined debenture as a certificate of acceptance of loan which is given under the company’s stamp and it carries an undertaking that the company will return the principal on a certain date.

Q.50. The maximum term of public deposits is

a. 12 months.

b. 24 months.

c. 36 months.

d. 48 months.

Answer:

(a)

Exp: Public deposits are one of the ways in which companies raise term loans. In case of public deposits, maximum period can not exceed 36 months. These deposits are free from any charge on company’s assets as well as are not insured.