Tag: public deposits

Questions Related to public deposits

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

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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

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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.

Public deposit obtained by a company means _______________.

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

  1. Deposits received from Government

  2. Deposits received from public at large

  3. Deposits received from stockists and agents

  4. All the above

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Correct Option: B
Explanation:

Public deposits obtained by a company means the deposits received by the company from public at large. Public deposits are unsecured, long term debt instrument. They have a slightly higher rate of interest when compared to that of interest rates of banks. They are usually issued to meet the working capital needs of the company.

State with reason whether the following statement is true or false:
The amount of deposit is a long term source of capital.

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

  1. True

  2. False

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Correct Option: B
Explanation:

(i) A company collects the required amount of capital through different sources.
(ii) The small part of the capital is raised through borrowing
(iii) The greater part of the capital is raised by the company through the issue of shares.
(iv) The short term capital is raised by the  company accepting deposits from the general public.
(v) The deposit accepted  by the company
from the  general public are called public deposit.
(vi) A company accepts deposit for a minimum period of 6 months and for a maximum period of 3 years.
(vii) Because of the above reason, the amount of deposit is a short term source of capital.

The merit(s) of public deposits is/are ______________________.

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

  1. Cost of public deposits is generally lower than the cost of borrowings.

  2. Public deposits do not usually create any charge on the assets of the company.

  3. As the depositors do not have voting rights, the control of the company is not diluted.

  4. All of the above

Show answer
Correct Option: D
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. The merits of public deposits are:
a) Cost of public deposits is generally lower than the cost of borrowings.b) Public deposits do not usually create any charge on the assets of the company.
c) As the depositors do not have voting rights, the control of the company is not diluted.

Limitation(s) of public deposit is/are _______.

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

  1. New companies generally find it difficult to raise funds through public deposits.

  2. It is an unreliable source of finance.

  3. Collection of public deposits may prove difficult when the size of deposits required is large.

  4. All of the above

Show answer
Correct Option: D
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. Limitations of public deposit are:a) New companies generally find it difficult to raise funds through public b) It is an unreliable source of finance.deposits.c) Collection of public deposits may prove difficult when the size of deposits required is large.

Public deposits refer to the unsecured deposits invited by companies from the public mainly to finance working capital needs.

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:

Public deposits refer to the unsecured deposits invited by companies from the public mainly to finance working capital needs- this is a true statement.  Public deposits do not usually create any charge on the assets of the company.