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Introduction to business capital/finance - class-XII

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

  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


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?

  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.


Correct Option: B

Bancassurance is ___________________.

  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


Correct Option: C

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

  1. primary

  2. secondary

  3. final

  4. alternative


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.

  1. 1

  2. 2

  3. 3

  4. 4

  5. None of the above


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.

  1. optional

  2. very crucial

  3. secondary

  4. none of the above


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.

As per section 2(51) of the Companies Act, 2013, "Key Managerial Personnel", in relation to a company, means _______.
(i) Chief Executive officer or managing director or manager
(ii) Company Secretary
(iii) General Manager
(iv) Whole Time Director
(v) Chief Legal Officer 
(vi) Chief Financial Officer
The correct answer is -

  1. (i), (ii), (iv) & (vi)

  2. (i), (iii), (iv), (v) & (vi)

  3. (i), (ii), (v) & (vi)

  4. (i), (iv), (v) & (vi)


Correct Option: A

The basic goal of financial management is ___________.

  1. Maximising the profit

  2. Maximising shareholders' wealth in the long run

  3. Maximising the rate of dividend

  4. Minimising the business risk.


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.

Which of the following is the external user of financial statements?

  1. Manager of the business

  2. CEO of the business

  3. Creditor of the business

  4. Controller of the business


Correct Option: C

Which of the following is said to be the lifeblood of an organization?

  1. Debentures

  2. Finance

  3. Material

  4. Goodwill


Correct Option: B
Explanation:

Finance is regarded as the lifeblood of a business enterprise. It is the basic foundation of all kinds of economic activities. Finance is the master key that provides access to all the sources for being employed in manufacturing and merchandising activities. The success of an organization largely depends on efficient management of its finances.

Money required for carrying out business activties is called ___________.

  1. financial management

  2. business finance

  3. finance

  4. cost management


Correct Option: B
Explanation:

Business finance refers to money and credit employed in business. It involves procurement and utilization of funds so that business firms may be able to carry out their operations effectively and efficiently.

Every business enterprise must undertake such business which is_________________.

  1. Unlawful

  2. Lawful

  3. Illegal

  4. All of above


Correct Option: B
Explanation:

Every business enterprise must undertake such business which is lawful. All business organization should adhere to the law of the country to ensure peace and order. Illegal and unlawful business organizations should not be undertaken.

BIFR means.

  1. Board for Industrial and Financial Reconstruction

  2. Board for International and Financial Reconstruction

  3. Board for Industrial and Forex Reconstruction

  4. Board for International and Forex Revival


Correct Option: A
Explanation:

Board for Industrial and Financial Reconstruction $(BIFR)$ is a board setup by the Government of India, in order to tackle the problem of industrial sickness, under the purview of Sick Industrial Companies (Special Provisions) Act,$1985$ $(SICA)$.

Interest paid by other than financial enterprises is shown in cash flow statement under ________________.

  1. Operating activities

  2. Investing activities

  3. Financing activities

  4. None of the above


Correct Option: C

To guard against the dangers of excess payment arising out of double insurance or over insurance made by the insured, insurance companies provide in their agreement _________________.

  1. Average clause

  2. Subrogation clause

  3. Risk clause

  4. Indemnity clause


Correct Option: D

Interest rate in cash credit is normally ______ bank credit account.

  1. higher than

  2. same

  3. lower than

  4. none of the above


Correct Option: C
Explanation:

Interest rate in cash credit is normally lower than bank credit account. Cash credit is a type of borrowing which can be obtained from the bank savings account without having credit balance, whereas bank credit refers to a loan which is issued by the banking company and which are to be repaid by the borrower with a higher interest rate.

Cash credit is normally given on security of stock, debtors etc. whereas bank credit is normally given on security of a fixed asset.

  1. True

  2. False


Correct Option: A
Explanation:

Cash credit is normally given on security of stock, debtors etc. whereas bank credit is normally given on security of a fixed asset- this is a rue statement.Cash credit is a type of borrowing which can be obtained from the bank savings account without having credit balance.

Factor(s) to consider before choosing trade credit or bank credit is/are _______.

  1. Rate of interest

  2. Processing fees

  3. Foreclosure charges

  4. All of the above


Correct Option: D
Explanation:
 Trade credit is provided by the suppliers whereas bank credit is provided by the banking companies. Factors to consider before choosing trade credit or bank credit are:a) Rate of interest
b) Processing fees
c) Foreclosure charges.

The Headquarters of World Bank is situated at ______________.

  1. London

  2. Washington DC

  3. New York

  4. Geneva


Correct Option: B
Explanation:

The World Bank was created at the 1944 Bretton Woods Conference along with the International Monetary Fund (IMF).

 The World Bank and the IMF are both based in Washington, D.C., and work closely with each other.

The World Bank is an international organization dedicated to providing financing, advice and research to developing nations to aid their economic advancement. 

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