Tag: sources of business finance - 1

Questions Related to sources of business finance - 1

Find the correct match of finance organization and their headquarters?

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. ADB-Manila

  2. RBI-New Delhi

  3. IMF-NewYork

  4. IDA-Geneva

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Correct Option: A

The Principal sources of capital at the earliest stages of the firm ______________.

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. Equity capital

  2. Short term debts

  3. Long term debts

  4. Both (a) and (b)

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Correct Option: D

Operating cycle can be delayed by ________________.

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. Increase in WIP period

  2. Decrease in raw materials storage period

  3. Decrease in credit payment period

  4. Both (A) and (C) above

  5. Both (B) and (C) above

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Correct Option: D
Explanation:

Operating cycle period = Raw material storage period + Conversion period + Finished goods storage period + average collection period - average payment period.
Increase in WIP (or conversion) period will increase the operating cycle period and this will lead to delay in the operating cycle.

The use of borrowings for the purpose of financial advantage for residual stockholders is also called ____________.

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. Trading on equity

  2. Leverage

  3. Either (a) or (b)

  4. None of the above

Show answer
Correct Option: C
Explanation:

Trading on equity, which is also referred to as financial leverage occurs when a corporation uses bonds, other debt, and prefered stock  to increase its earnings on its common stock.

Long-term equity anticipation security is usually classified as ______________.

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. short-term options

  2. long-term options

  3. short money options

  4. yearly call

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Correct Option: B

Which of the following is a requirement of financing a plan?

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. Matching financial resources to physical targets

  2. Realisation of Plan target through correct implementation

  3. Raising financial resources to implement the Plan

  4. To make the Plan smaller in size to be met by the available resource.

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Correct Option: A

Which of the following does not constitute a source of medium term financing?

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. Issue of equity shares

  2. Issue of preference shares

  3. Term loans from banks

  4. All the above

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Correct Option: A

Internal strategy of a business invariably takes care of ________________.

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. taking care of political environment

  2. media

  3. employees.

  4. both b & c.

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Correct Option: D

Working capital of an enterprise is used for holding current assets such as ________.

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. Stock of material

  2. Bills receivables

  3. Only A

  4. Both A and B

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Correct Option: D
Explanation:

Working capital of an enterprise is used for holding current assets such as stock of material and bills receivables. Working capital refers to the capital which are needed to run day-to-day activities.

Shelf stock refers to ______________.

elements of business sources of business finance - 1 classification & choice of sources of funds classification of sources of finance owned funds and borrowed funds

  1. Perishable goods

  2. Items that are to be packaged and sold

  3. Items that are stored by the firm and sold with little or no modifications

  4. Accessories which are not part of the standard equipment

  5. Stock which is to be stored for more than one year.

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Correct Option: C
Explanation:

Items that are stored by the firm and sold with little or no modifications are called the shelf stock.