Tag: commerce

Questions Related to commerce

Which of the following is a limitation of commercial paper?

commerce sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. The size of money that can be raised through commercial paper is limited to the excess liquidity available with suppliers of funds at a particular time.

  2. A commercial paper is sold on an unsecured basis,

  3. As it is freely transferable instrument, it has high liquidity.

  4. It provides more funds compared to other sources.

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Correct Option: A
Explanation:

Commercial paper is an unsecured promissory note given by a firm to raise finances for a short period of time. Only financially sound and highly rated firms can raise money through commercial papers. 

The size of money that can be raised through commercial paper is limited to the excess liquidity available with the suppliers of funds at a particular time.

The cost of commercial paper to the issuing firm is ________ than the cost of commercial bank loans.

commerce sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. lower

  2. higher

  3. equal

  4. none of the above

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Correct Option: A
Explanation:

Commercial Paper is issued by one firm to another business firm, Insurance company, pension funds and it is an impersonal method of raising finances. therefore the cost of commercial paper to the issuing firm is lower than the cost of commercial bank loans.

Commercial paper is an __________ method of financing.

commerce sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. personal

  2. impersonal

  3. nominal

  4. real

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Correct Option: B
Explanation:

Commercial paper is an unsecured promissory note issued by a firm to raise funds for a short period. It is issued by one firm to another business firm, insurance companies, pension funds, and banks. Hence, Commercial Paper is an impersonal method of financing.

Commercial papers represent a new financial instrument issued for the purpose of _______________.

commerce sources of business finance - 2 commercial paper non-institutional sources - short-term short term sources of finance

  1. Project financing

  2. Working capital

  3. Leasing of plant and equipment

  4. Import of capital goods

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Correct Option: B
Explanation:

Commercial papers are short-term debt, unsecured instrument which is issued by the companies to meet their short term obligations that is to meet their working capital requirements. They are usually issued for 15 days to 1 year.

By the term SCM, we mean _________.

commerce types of trade features of internal trade internal trade business and industry

  1. supply chain management

  2. supply chain monitoring

  3. supply chain movement

  4. none of the above

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Correct Option: A

The results of over-trading may be ____________.

commerce types of trade features of internal trade internal trade business and industry

  1. Overcapitalization

  2. Liquidity

  3. Technical insolvency

  4. All of the above

  5. Both (B) and (C) above

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Correct Option: E
Explanation:

Over-trading occurs when there is a disproportionately high turnover of assets compared to the volume of sales. The high-turnover is indicative of less amount of cash invested in current assets which can result in liquidity and might even lead to technical insolvency.

If the realized collection period is more than the terms of trade it can be said that __________________.

commerce types of trade features of internal trade internal trade business and industry

  1. The collection job is over

  2. The quality of debtors is poor

  3. The average daily sales are low

  4. All of the above

  5. Both (A) and (B) above

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Correct Option: E
Explanation:

If the realized collection period is more than the terms of trade, then it indicates that is taking more time to convert its receivables into cash. This could be due to poor collection efforts of the firm or poor quality of the debtors. 

The phenomenon of over-trading in working capital is characterized by _______________________.

commerce types of trade features of internal trade internal trade business and industry

  1. Less amount of cash invested in current assets

  2. Overcapitalizatiion of the company as compared to volume of sales

  3. High amount of cash invested in current assets

  4. All of the above

  5. Both (A) and (C) above

Show answer
Correct Option: A
Explanation:

Over-trading can be noticed from the disproportionately high turnover of assets compared to the volume of sales. This high turnover is indicative of less amount of cash invested in current assets which can create problems of liquidity at the time of making payments for current obligations.

Buying and selling of goods and services within the boundaries of a nation are referred to as __________.

commerce types of trade features of internal trade internal trade business and industry

  1. external trade

  2. internal trade

  3. sale transaction

  4. none of the above

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Correct Option: B

Purchase and sale of goods in relatively small quantities, generally to the ultimate consumers, is referred to as _________.

commerce types of trade features of internal trade internal trade business and industry

  1. wholesale trade

  2. retail trade

  3. Internal trade

  4. External trade

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Correct Option: B