Tag: sources of business finance - 1

Questions Related to sources of business finance - 1

Other things remaining the same, an increase in the tax rate on corporate profits will __________________.

organisation of commerce and management sources of business finance - 1 finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

  1. Make debt relatively cheaper

  2. Make debt relatively less cheap home

  3. No impact on the cost of debt

  4. We can't say

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Correct Option: A
Explanation:

Where there is an increase in the tax on corporate profit, the debt becomes relatively cheaper. This is because interest rate is to be paid to the debtors is deducted from the total income before calculating the value of tax. Thus, as the valueof tax increases, the debt becomes relatively cheaper.

Which one of the following statements regarding 'financial literacy' is not true?

organisation of commerce and management sources of business finance - 1 finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

  1. Its objective is to make people aware of the risks and rewards of investments so that they can make an informed choice.

  2. India has a formal nationwide structured financial education programme.

  3. This would enhance the effectiveness and integrity of financial markets.

  4. It reduces the government burden in protecting the common person from elements of market failure.

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Correct Option: B

Bancassurance is ___________________.

organisation of commerce and management sources of business finance - 1 finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

  1. an insurance scheme to insure bank deposits

  2. an insurance scheme exclusively for the employees banks

  3. a composite financial service offering both bank and insurance products

  4. a bank deposit scheme exclusively for employees of insurance companies

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Correct Option: C

The _________ aim of financial management is to maximize shareholder's wealth, which is referred to as the wealth maximization.

organisation of commerce and management sources of business finance - 1 finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

  1. primary

  2. secondary

  3. final

  4. alternative

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Correct Option: A
Explanation:

The most widely accepted objective of the firm is to maximize the value of the firm for its owners, that is, to maximize shareholder wealth. Shareholder wealth is represented by the market price of a firm’s common stock.

The shareholder wealth maximization goal states that management should seek to maximize the present value of the expected future returns to the owners (that is, shareholders) of the firm. 

American Depository Receipts (ADRs) are divided into __________ number of levels.

organisation of commerce and management sources of business finance - 1 finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

  1. 1

  2. 2

  3. 3

  4. 4

  5. None of the above

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Correct Option: C
Explanation:

ADR is a dollar denominated negotiable certificate, it represents non-US company;'s Publicly traded equity. ADRs are divided into three levels based on the regulations and privilege of each company's issue. 

Availability of adequate finance is ___________ for the survival and growth of a business.

organisation of commerce and management sources of business finance - 1 finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

  1. optional

  2. very crucial

  3. secondary

  4. none of the above

Show answer
Correct Option: B
Explanation:
Proper management of working capital is essential to a company’s fundamental financial health and operational success as a business. A hallmark of good business management is the ability to manage the working capital requirements to maintain a solid balance between growth, profitability and liquidity.

The basic goal of financial management is ___________.

organisation of commerce and management sources of business finance - 1 finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance

  1. Maximising the profit

  2. Maximising shareholders' wealth in the long run

  3. Maximising the rate of dividend

  4. Minimising the business risk.

Show answer
Correct Option: A
Explanation:
A company's most important goal is to make money and keep it. Profit-margin ratios are one way to measure how much money a company squeezes from its total revenue or total sales.

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.