Tag: sources of business finance - 2

Questions Related to sources of business finance - 2

Debenture holders are termed as __________ of the company.

organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

  1. debtors

  2. creditors

  3. traders

  4. consumers

Show answer
Correct Option: B
Explanation:
 The debenture issued by a company is an acknowledgment that the company has borrowed a certain amount of money,which it promises to repay at a future date. Debenture holders are, therefore,termed as creditors of the company.

Debentures are an important instrument for raising _______ term debt capital.

organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

  1. short

  2. long

  3. medium

  4. none of the above

Show answer
Correct Option: B
Explanation:

Debentures are an important instrument for raising long term debt capital. a debenture issued by a company represents that the company has borrowed some amount of capital and the company promises to return them on a fixed rate of interest.

A company can raise funds through issue of debentures, which bear a ________ rate of interest.

organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

  1. fixed

  2. fluctuating

  3. higher

  4. lower

Show answer
Correct Option: A
Explanation:

Debentures can be issued by a company to raise funds as long term debt capital, which the company promises to return back on a fixed rate of interest. 

Debenture holders are paid _________ stated amount of interest at specified intervals.

organisation of commerce and management sources of business finance - 2 debentures / bonds debentures non-institutional sources - long-term

  1. fixed

  2. fluctuating

  3. higher

  4. lower

Show answer
Correct Option: A
Explanation:

 Debenture holders are paid a fixed stated amount of interest at specified intervals. Public issue of debentures requires that the issue be rated by a credit rating agency.

If the stock velocity is 6, cost of goods sold is Rs.54,000 and closing stock is Rs.10,000 the opening stock is __________.

organisation of commerce and management sources of business finance - 2 equity shares share and stock equity and preference shares

  1. Rs. 8,000

  2. Rs. 9,000

  3. Rs. 10,000

  4. Rs. 12,000

  5. Rs. 18,000

Show answer
Correct Option: A
Explanation:

Let the opening stock is x.
Stock velocity = cost of goods sold / average inventory
6 = 54,000/(10000+x)/2
hence x = Rs.8,000.

X limited issued 10,000 equity shares of Rs.10 each at premium Rs.2 each. The company has incurred issue expenses of Rs.5,000. The equity shareholders expect dividend of $18\%$ then cost of capital is ____________.

organisation of commerce and management sources of business finance - 2 equity shares share and stock equity and preference shares

  1. $18\%$

  2. $15.65\%$

  3. $16.65\%$

  4. $18.65\%$

Show answer
Correct Option: B
Explanation:

K$ _e$ = $\frac{D _1}{NP}$
Where NP i.(E) Net Proceed of shares = $\frac{1000 X12 - 5000}{10000}$
Dividend of a share (D$ _I$) = Rs. 1.8.

Which of the following feature(s) of preference shares are similar to those of equity shares?

organisation of commerce and management sources of business finance - 2 equity shares share and stock equity and preference shares

  1. Redeemability

  2. No obligation to pay dividend

  3. Voting rights

  4. Change over assets

  5. Both (B) and (C) above

Show answer
Correct Option: B
Explanation:

Like in the case of equity shareholders there is no obligatory payment to the preference shareholders and the preference dividend is not tax deductable.

The means of obtaining financial resources that involves the sale of part of the ownership of the business is called ______.

organisation of commerce and management sources of business finance - 2 equity shares share and stock equity and preference shares

  1. bankruptcy

  2. equity financing

  3. commercial loans

  4. debt financing

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Correct Option: B
Explanation:

Equity financing is the method of raising capital by selling company stock to investors. In return for the investment, the shareholders receive ownership interests in the company.

The shares of a company are________. 

organisation of commerce and management sources of business finance - 2 equity shares share and stock equity and preference shares

  1. transferable

  2. non-transferable

  3. fixed

  4. none of the above

Show answer
Correct Option: A
Explanation:

The shares of a company are transferable as the shares can be trade between buyers and sellers of the shares of the stock of the company at a mutually agreed price.

Equity share holders may receive ___________ on their investment.

organisation of commerce and management sources of business finance - 2 equity shares share and stock equity and preference shares

  1. Interest

  2. Dividend

  3. Bonus

  4. (B) and (C)

Show answer
Correct Option: D
Explanation:

Equity share holders may receive  dividend and bonus on their investment. Dividend refers to the sum of money which are paid out of the total profits and bonus refers to the one time payment.