Tag: classification of sources of finance

Questions Related to classification of sources of finance

Short-term financing is most common for financing 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. Fictitious assets

  2. Current assets

  3. Fixed assets

  4. All of the above

Show answer
Correct Option: B
Explanation:

Every business needs to invest into in current assets. These assets are also known as working capital to facilitate smooth working of day-to-day activities. Short term financing  is raised to cope up with these day-to-day activites to run a business and has to be repaid within a year's time.

Sources that provide funds for a short duration are 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. Trade credit

  2. Loans from commercial banks

  3. Commercial papers

  4. All of the above

Show answer
Correct Option: D
Explanation:

Sources of funds that provide funds for a duration of less than one year are:

Trade Credits: These are the credits granted to manufacturers and traders by the suppliers of raw materials.
Loans from commercial banks: Commercial banks grant short-term finance to business firms which is known as bank credit
Commercial papers:Commercial paper is a money-market security issued (sold) by large corporations to obtain funds to meet short-term debt obligations  

 The funds required for a period of less than one year are 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. Long-term finance

  2. Medium-term finance

  3. Short-term finance

  4. All of the above

Show answer
Correct Option: C
Explanation:

The funds that are borrowed for less than a year's period of time are known as short-term finances. Some of the sources of short term finances are trade credits, bank credits, customer's advances, cash credit, overdrafts, etc.

On basis of time period, the different sources of funds can be categorized into _____ categories.

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. Two

  2. Three

  3. Four

  4. Five

Show answer
Correct Option: B
Explanation:

Sources of funds can be classified into three categories on the basis of the duration of the financing available. They are : 

Long-term sources: These are for a long period of time, exceeding 5 years.
Medium- term sources : These are for a medium period of time, i.e more than a year and less than 5 years.
Short- term sources: These are for a short period of time, i.e not exceeding one year.

On the basis of period, the different sources of funds are ______.

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. Medium-term sources

  2. Long-term source

  3. Short-term sources.

  4. All of the above

Show answer
Correct Option: D
Explanation:

Sources of funds can be classified into three categories on the basis of the duration of the financing available. They are : 

Long-term sources: These are for a long period of time, exceeding 5 years.
Medium- term sources : These are for a medium period of time, i.e more than a year and less than 5 years.
Short- term sources: These are for a short period of time, i.e not exceeding one year.

Long-term sources of finance includes ____________.

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. Debentures

  2. Long-term borrowings

  3. Loans from financial institutions

  4. All of the above

Show answer
Correct Option: D
Explanation:

The long-term sources fulfil the financial requirements of an enterprise for a period exceeding 5 years and include sources such as shares and debentures, long-term borrowings and loans from financial institutions.

Such financing is generally required for the acquisition of fixed assets such as equipment, plant, etc.

The funds required for a period of more than one year but less than five years is 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. long-term finance

  2. medium-term finance

  3. short-term finance

  4. none of the above

Show answer
Correct Option: B
Explanation:

The classification of sources of funds on the basis of period are related to the duration of time. The medium-term sources of funds are the ones that provide financing for a time period of more than a year and not exceeding five years of time.

Long-term financing is generally required for the acquisition 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. Current assets

  2. Fixed assets

  3. Fictitious asset

  4. All of the above

Show answer
Correct Option: B
Explanation:

Long-term finance is that which is required for a long period of time, i.e. no less than 5 years . These long-term sources are generally required for the acquisition of fixed assets as these fixed assets are purchased for a long period and are also very expensive than current assets. 

Funds required for period exceeding 5 years is _______.

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. Long-term financing

  2. Short-term financing

  3. Medium-term financing

  4. All of the above

Show answer
Correct Option: A
Explanation:

The funds that are required for a long period of time are known as long-term financing. These types of financing is required for a period exceeding 5 years.

Wipro was founded in _______.

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. 1948

  2. 1958

  3. 1945

  4. 1968

Show answer
Correct Option: C
Explanation:

Wipro is a multinational corporation of India. It is mainly a company based on information technology and business process services. Wipro was founded in 1945. Headquater of Wipro is in Bangalore.