Tag: long term sources of finance

Questions Related to long term sources of finance

The owner of the assets is called the _______ while the party that used the asset is known as the ________.

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

  1. Lessor, lessee

  2. Lessee, lessor

  3. Trader, lessee

  4. None of the above

Show answer
Correct Option: A
Explanation:

In a lease agreement, the owner of the assets is 'lessor' and the party that uses the asset is known as 'lessee'. The lessee pays a fixed periodic amount known as the lease rent to the lessor for the use of the assets.

Simple documentation makes it easier to finance assets, is a ________ of lease financing.

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

  1. Function

  2. Role

  3. Merit

  4. Limitation

Show answer
Correct Option: C
Explanation:

Lease financing in other words is renting of an asset for some specific period. The lessee pays a fixed periodic amount called lease rental to the lessor for the use of the asset. Therefore simple documentation makes it easier to finance assets and is a merit of lease financing.

_________ is deprived from the residual value of the asset.

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

  1. Lessee

  2. Lessor

  3. Both a and b

  4. None of the above

Show answer
Correct Option: A
Explanation:

In a lease agreement, the owner of the assets is 'lessor' and the party that uses the asset is known as 'lessee'. The lessee pays a fixed periodic amount known as the lease rent to the lessor for the use of the assets. The lessee never becomes the owner of the assets, it is deprived from the residual value of the asset.

The lessee pays a _________ periodic amount called lease rental to the lessor for the use of the asset.

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

  1. Fixed

  2. Fluctuating

  3. Both a and b

  4. None of the above

Show answer
Correct Option: A
Explanation:

Lease financing is a contractual agreement where by  the owner of the assets is 'lessor' that provides the grant to  the party to use the assets, who is known as 'lessee'. The lessee pays a fixed periodic amount known as the lease rent to the lessor for the use of the assets.

Which of the following is a merit of lease financing?

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

  1. It enables the lessee to acquire the asset with a lower investment.

  2. The risk of obsolescence is borne by the lesser.

  3. The lease agreement does not affect the debt raising capacity of an enterprise

  4. All of the above

Show answer
Correct Option: D
Explanation:

Few merits of lease financing are: It enables the lessee to acquire the assets with low investment, the risk of obsolescence is borne by the lessor, the lease agreement does not affect the debt raising capacity of an enterprise.

Fund means __________.

organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

  1. Capital

  2. Bond

  3. Assets

  4. Working Capital

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Correct Option: D
Explanation:

Receivable turnover ratio = Net credits sale/ Average accounts receivable = 10
and average collection period  =360
receivables turnover ratio = 36
Hence a receivable turnover ratio of 10 implies that the credit sales are 10 times the average receivables or in other words receivables are generated 10 times during the year.

The NABARD provides refinancing facilities to _________.

organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

  1. small industries

  2. village industries

  3. cottage industries

  4. all of the above

Show answer
Correct Option: D
Explanation:

NABARD is entrusted by government for development of rural areas in India. Small industries, village industries and cottage industries are the most prevailing industries in rural parts of India, with limited amount of finances. Hence, The NABARD provides refinancing facilities to such industries.

The depository receipts issued by a company in the USA are known as____________.

organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

  1. Global Depository Receipts

  2. American Depository Receipts

  3. Foreign Currency Convertible Bonds

  4. All of the above

Show answer
Correct Option: B
Explanation:
The depository receipts issued by a company in the USA are known as American Depository Receipts. ADRs are bought and sold in American markets like regular stocks. It is similar to Global Depository Reciepts. 

What is the Chief feature of the group banking system?

organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

  1. Centralised management

  2. Decentralised management

  3. Wide network of branches

  4. All the above

Show answer
Correct Option: A
Explanation:

Each member bank of the group banking system retains its separate entity and maintains its board of directors but however, the group banking system enjoy the benefits of centralized administration. 

Merchant Bank also known as ______.

organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

  1. NABARD

  2. investment bank

  3. commercial bank

  4. development bank

Show answer
Correct Option: B
Explanation:

Merchant bank and investment banks both provide advice to companies regarding potential mergers and also provide investment research to those companies.