Free Sources of Business Finance 01 Practice Test - 11th Grade - Commerce
Question 1
______ is a prerequisite to creation of a company.
Issuing preference shares
Issuing equity shares
Retaining earnings
All of the above
SOLUTION
Solution : B
Issuing equity shares is a prerequisite to the creation of a company. When a company is formed it can issue shares to the public or to private individuals.
Question 2
Do preference shareholders get an upper hand during the time of liquidation of the company?
True
False
SOLUTION
Solution : A
During the time of liquidation, preference shareholders have the right to receive their investment prior to equity shareholders.
Question 3
Payment of fixed rate of dividend to preference shares may enable a company to declare higher rates of dividend for the equity shareholders in good times.
True
False
SOLUTION
Solution : A
True. Payment of fixed rate of dividend to preference shares may enable a company to declare higher rates of dividend for the equity shareholders in good times.
Question 4
Which one of the following facilitates easy purchase of goods and services without making immediate payment?
Equity Shares
Preference Shares
Trade Credit
Debentures
SOLUTION
Solution : C
Trade credit facilitates easy purchase of supplies without immediate payment. Such credit appears in the records of the buyer of goods as accounts payable.
Question 5
Lease rentals paid by the lessee are deductible for computing taxable profits.
True
False
SOLUTION
Solution : A
True. Lease rentals paid by the lessee are deductible for computing taxable profits, and hence, lead to savings in taxes.
Question 6
The lessee never becomes the owner of the asset.
True
False
SOLUTION
Solution : A
True. The lessee never becomes the owner of the asset. He never reaps the benefits of ownership.
Question 7
A detailed investigation of the company is done in regard to the company affairs while taking a loan from commercial banks.
True
False
SOLUTION
Solution : A
True. A detailed investigation of the company is done in regard to the company affairs, financial structure and also for the company’s security of assets. This makes it a bit hard in obtaining funds.
Question 8
A commercial bank is a financial institution which performs the functions of accepting deposits from the general public and giving loans for investment with the aim of earning profits.
True
False
SOLUTION
Solution : A
True. A commercial bank is a financial institution which performs the functions of accepting deposits from the general public and giving loans for investment with the aim of earning profits.
Question 9
With the issue of debentures, the capacity of a company to further borrow funds reduces.
True
False
SOLUTION
Solution : A
True. Each company has certain borrowing capacity. With the issue of debentures, the capacity of a company to further borrow funds reduces.
Question 10
Interest on debentures is also called ________.
Fixed rate
Borrowing rate
Coupon rate
None of the above
SOLUTION
Solution : C
Interest on debentures is also called coupon rate.