Tag: owned funds and borrowed funds

Questions Related to owned funds and borrowed funds

Public deposits are the deposits that are raised directly from _______.

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. The public

  2. The directors

  3. The auditors

  4. The owners

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Correct Option: A
Explanation:

Public deposits refer to the deposits that are raised by the company or an organization directly from the public. Public deposits are an important source of financing the medium term and long term requirements of a company.

Which of the following is true with respect to sources and uses of funds?

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. Depreciation and decrease in NWC are sources of funds

  2. Depreciation and decrease in NWC are uses of funds

  3. Depreciation is a source of fund but decrease in NWC is use of fund

  4. Depreciation in a use of fund but decrease in NWC is source of fund.

  5. Depreciation and increase in NWC are uses of funds.

Show answer
Correct Option: A
Explanation:

As per the accounting principles to ascertain the profits of the firm, depreciation on fixed assets should be charged against the revenue of the fir by debiting to the profit and loss account. This reduces the profits of the firm. But charging depreciation does not involves any fund. Therefore, the amount of depreciation charged against the revenue of the firm should be  added back to the net profit to estimate the funds from operations, which is a source of fund. Decrease in net working capital is a source of fund.

$\frac{Shareholder's funds}{total assets}\100$ is a ____________.

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. liquidity ratio

  2. solvency ratio

  3. profitability ratio

  4. credibility ratio

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Correct Option: B
Explanation:

Share holder's funds = equity share capital + Pref. shares + reserves and surplus - losses
Share holder's fund = net worth = proprietary fund = equity
Equity share holder's fund = share holders fund - pref. shares.

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

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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