Tag: non-institutional sources - medium-term

Questions Related to non-institutional sources - medium-term

Renewal facility enables companies to use public deposits as medium-term finance.

commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

Renewal facility enables companies to use public deposits as medium-term finance- this is a true statement.Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company.

Public deposits of a company cannot exceed _____ per cent of its share capital and free reserves. 

commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. 15

  2. 20

  3. 25

  4. 30

Show answer
Correct Option: C
Explanation:

Public deposits refers to the unsecured securities which is invited from the public. It is mainly used to finance the working capital of the company. Public deposits of a company cannot exceed 25 per cent of its share capital and free reserves.

State the following statement is True or False:
A document issued to public for collection of capital is prospectus.
commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

A document issued to public for collection of capital is prospectus- this is a true statement.The invitation to public for capital subscriptions is through prospectust. Prospectus provide details about the offer of sale to the public. It is issued by SEBI.

State the following statement is True or False:
The invitation to public for capital subscriptions is through prospectus.

commerce sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

The invitation to public for capital subscriptions is through prospectus- this a true statement. Prospectus provide details about the offer of sale to the public. It is issued by SEBI.

Public deposits takes care of both _________ and _________-term financial requirements of a business.

commercial studies sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. Large, medium

  2. Medium, short

  3. Large, short

  4. None of the above

Show answer
Correct Option: B
Explanation:
Public deposits can take care of both medium and short-term financial requirements of a business. 
The deposits are beneficial to both the depositor as well as to the organisation. While the depositors get higher interest rate than that offered by banks.

Companies generally invite public deposits for a period upto ________ years.

commercial studies sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. One

  2. Two

  3. Three

  4. Four

Show answer
Correct Option: C
Explanation:
The deposits that are raised by organisations directly from the public are known as public deposits. The organization in return issues a deposit receipt as acknowledgement of the debt. Public deposits can take care of both short-term or medium-term financial requirements. Companies generally invite public deposits for medium-term period upto three years.

Cost of public deposits is generally _______ than the cost of borrowings from banks and financial institutions.

commercial studies sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. Higher

  2. Lower

  3. Equal

  4. None of the above

Show answer
Correct Option: B
Explanation:
The deposits that are raised by organisations directly from the public are known as public deposits. Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions.

The deposits that are raised by organisations directly from the public are known as __________.

commercial studies sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. Lease finance

  2. Public deposits

  3. Commercial paper

  4. Trade credit

Show answer
Correct Option: B
Explanation:

The deposits that are raised by organisations directly from the public are known as public deposits. Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions. Public deposits are beneficial to both depositor as well as the organization. 

Rates of interest offered on public deposits are usually _________ than that offered on bank deposits.

commercial studies sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. Higher

  2. Lower

  3. Equal

  4. Both a and b

Show answer
Correct Option: A
Explanation:
The deposits that are raised by organisations directly from the public are known as public deposits. Rates of interest offered on public deposits are usually higher than that offered on bank deposits. 

Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form. The organisation in return issues a deposit receipt as acknowledgment of the debt.

Collection of public deposits may prove difficult, particularly when the size of deposits required is _________.

commercial studies sources of business finance - 2 public deposits non-institutional sources - medium-term financing lease financing

  1. Large

  2. Small

  3. Medium

  4. Both a and b

Show answer
Correct Option: A
Explanation:

The deposits that are raised directly from the public are public deposits. Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form. the cost of deposits to the company is less than the cost of borrowings from banks. But Collection of public deposits may prove difficult, particularly when the size of deposits required is large.