Tag: business studies

Questions Related to business studies

Which of the following is/are pitfall(s) and trap(s) to be on the lookout for when dealing with short term finance companies?

long-term and short-term finance sources of business finance business studies

  1. Hidden Fees and charges

  2. Upfront fees

  3. Misleading time frames

  4. All of the above

Show answer
Correct Option: D
Explanation:

Many lenders will advertise a low interest rate but will have a huge application fee, valuation fee, documentation fee or commitment fee attached to the loan which ends up making it very expensive. Many lenders will promise that they can fund within a short period of time but end up pushing back deadlines and blame the client when in fact they have never been able to do what they promised.

Inadequacy of short-term funds may even lead to closure of business.

long-term and short-term finance sources of business finance business studies

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

Inadequate working capital may be the major causes for closing down the business organization. Due to shortage of working capital, raw materials can not be purchased on time and payment of labor and other expenses can not be made on time. Due to this companies financial reputation will go down and on the same time business cannot run properly.

Which among the following is not the source of short term finance?

long-term and short-term finance sources of business finance business studies

  1. Trade credit

  2. Customers advances

  3. Installment credit

  4. Equity financing

Show answer
Correct Option: D
Explanation:

Equity finance is a method of raising fresh capital by selling shares of the company to public, institutional investors, or financial institutions. The people who buy shares are referred to as shareholders of the company because they have received ownership interest in the company. It is one of sources of the long term financing.

Which is/are the purpose of long term loan?

long-term and short-term finance sources of business finance business studies

  1. To finance fixed assets.

  2. Expansion of companies.

  3. Provide capital for funding the operations.

  4. All of the above

Show answer
Correct Option: D
Explanation:

Businesses should generally follow the rule of tying the length of their financing to the life of the asset they are financing. So, if a business needs to make a major capital improvement, such as purchasing a piece of equipment for their manufacturing process that will last 10 years, a long-term business loan would be the appropriate type of financing. A short-term business loan would not be appropriate in this case. If a business needs to buy capital equipment, buildings, other businesses, or undertake construction projects, a long-term loan is the way to go.

The following are the different types of inventories _______________________.

long-term and short-term finance sources of business finance business studies

  1. Flabby inventory, profit making inventory and excessive inventory

  2. Safety inventory and Normal inventory

  3. Both (a) and (b)

  4. Profit making inventory and safety inventory

Show answer
Correct Option: C

The costliest of long-term sources of finance is __________________.

long-term and short-term finance sources of business finance business studies

  1. Preference share capital

  2. Retained earnings

  3. Equity share capital

  4. Debentures

  5. Capital raised through private placement.

Show answer
Correct Option: A
Explanation:

Preference Share is the Costliest Long - term Source of Finance. The costliest long term source of finance is Preference share capital or preferred stock capital. It is the source of the finance. When it is compared to other source of long term sources.

Which of the following is most appropriate beginning for a fund raising press release?

long-term and short-term finance sources of business finance business studies

  1. Asking for cheques towards payment

  2. Inviting for money

  3. Explaining the purpose

  4. None of the above

Show answer
Correct Option: A
Explanation:

Asking for cheques towards payment is most appropriate beginning for a fund raising press release. It helps to raise and maintain the profile of the organization.

Decisions for raising funds from long-term sources are called ___________.

long-term and short-term finance sources of business finance business studies

  1. capital structure decision

  2. investment decisions

  3. dividend decisions

  4. investment of funds

Show answer
Correct Option: A
Explanation:

One of the important decisions under financial management relates to the financing pattern or the proportion of the use of different sources in raising funds.

Capital structure refers to the mix between owners and borrowed funds.
Decisions for raising funds from long-term sources are part of capital structure decisions.

Of the total ________ term finance, the proportions to be raised by way of debt and/or equity is also a financial management decision.

long-term and short-term finance sources of business finance business studies

  1. short

  2. medium

  3. long

  4. both a and b

Show answer
Correct Option: C
Explanation:

Financial management, among others, involves decision about the proportion of long-term and short term funds. An organisation wanting to have more liquid assets would raise relatively more amount on a long-term basis. There is a choice between liquidity and profitability. The underlying assumption here is that current liabilities cost less than long term liabilities.

Which of the following are factors affecting the choice of source of funds?

long-term and short-term finance sources of business finance business studies

  1. Cost

  2. Purpose and time period

  3. Risk profile

  4. All of the above

Show answer
Correct Option: D
Explanation:

A business cannot function smoothly unless it has adequate funds are made available to them. The need of funds arises from the stage when an entrepreneur decides to start a business. The factors affecting the choice of sources of funds are the cost that it will incur to raise funds, the purpose and the duration for which the funds are to be raised and the risk that a company has to bear to raise those funds.