Question: Financial needs refer to:
A) The desire of a business to maximize profits
B) The amount of money required to start and operate a
business
C) The customer demand for a company's products or
services
D) The legal requirements for financial reporting
Answer: B
Question: What is the primary purpose of assessing
financial needs in a business?
A) To determine the best marketing strategy
B) To identify potential competitors
C) To assess the company's liquidity ratio
D) To ensure adequate funding to meet business goals
Answer: D
Question: Which of the following is NOT typically
considered a financial need of a business?
A) Inventory management
B) Employee training
C) Marketing expenses
D) Employee satisfaction surveys
Answer: D
Question: How are long-term financial needs different
from short-term financial needs?
A) Long-term needs are for more extended periods,
while short-term needs are for immediate requirements.
B) Short-term needs involve investing in capital
projects, while long-term needs focus on managing cash flow.
C) Long-term needs are for operational expenses, while
short-term needs are for strategic investments.
D) Short-term needs are related to external financing,
while long-term needs are covered by internal resources.
Answer: A
Question: The process of forecasting financial needs
involves:
A) Analyzing past financial data only
B) Projecting future revenues and expenses
C) Relying solely on intuition and guesswork
D) Assessing the company's social media presence
Answer: B
Question: Which of the
following is an example of a long-term source of finance for a company?
A) Trade credit from
suppliers
B) Bank overdraft
facility
C) Issuing corporate
bonds
D) Factoring of accounts
receivable
Answer: C
Question: Equity
financing involves:
A) Borrowing funds from
financial institutions
B) Issuing shares or
ownership stakes to investors
C) Obtaining loans with a
fixed interest rate
D) Selling accounts
receivable to a third party
Answer: B
Question: What is the
primary difference between debt financing and equity financing?
A) Debt financing
involves selling ownership stakes, while equity financing involves borrowing
funds.
B) Debt financing
provides ownership rights to investors, while equity financing requires
repayment with interest.
C) Debt financing does
not dilute ownership, while equity financing may lead to a dilution of
ownership.
D) Debt financing is a
long-term source of finance, while equity financing is a short-term source.
Answer: C
Question: Which of the
following is a characteristic of long-term bank loans?
A) High-interest rates
and short repayment period
B) Borrowing from
multiple banks simultaneously
C) Typically used to
cover short-term operational expenses
D) Extended repayment
period, often years or decades
Answer: D
Question: Real Estate
Investment Trusts (REITs) offer long-term financing primarily in which sector?
A) Technology
B) Healthcare
C) Real estate
D) Retail
Answer: C
Question: Which of the following is true about equity securities?
A) They represent a company's debt
obligation to investors.
B) They pay a fixed interest rate
to investors.
C) They provide ownership rights
and voting privileges to investors.
D) They have a maturity date when
the principal is repaid.
Question: What is the process of
selling securities directly to a select group of investors, such as
institutional investors or accredited individuals?
A) Initial Public Offering (IPO)
B) Secondary Market Offering
C) Private Placement
D) Rights Issue
Question: Convertible bonds are
securities that:
A) Offer a fixed interest rate to
investors.
B) Provide ownership rights and
voting privileges to investors.
C) Can be exchanged for a
predetermined number of shares of the issuing company's common stock.
D) Are backed by the assets of the
issuing company.
Question: What is the purpose of a
prospectus in the issuance of securities?
A) To outline the pricing of the
securities during an IPO.
B) To facilitate trading of the
securities in the secondary market.
C) To provide information to
potential investors about the issuing company and the securities being offered.
D) To act as a legally binding
contract between the issuing company and investors.
Question: When a company decides
to issue securities to the public for the first time and list them on a stock
exchange, it is known as:
A) Secondary offering
B) Private Placement
C) Initial Public Offering (IPO)
D) Rights Issue
Question:
Which of the following is an example of trade credit as a short-term financing
source?
a)
Issuing commercial paper
b)
Bank overdraft facility
c)
Borrowing from a moneylender
d)
Purchasing inventory on credit from suppliers
Answer:
d) Purchasing inventory on credit from suppliers
Question:
What type of short-term finance involves a continuous line of credit that a
business can draw upon when needed?
a)
Bank overdraft
b)
Commercial paper
c)
Factoring
d)
Revolving credit line
Answer:
d) Revolving credit line
Question:
Commercial paper is typically issued by:
a)
Small businesses seeking working capital
b)
Government entities for infrastructure projects
c)
Large corporations with strong credit ratings
d)
Individual borrowers for personal expenses
Answer:
c) Large corporations with strong credit ratings
Question:
Which of the following short-term financing options involves selling accounts
receivable to a third party at a discount?
a)
Bank loan
b)
Trade credit
c)
Factoring
d)
Commercial paper
Answer:
c) Factoring
Question:
What is the main advantage of using trade credit as a short-term financing
source?
a)
It allows businesses to raise large amounts of capital quickly.
b)
It provides access to flexible credit with no repayment terms.
c)
It enables businesses to earn interest on excess funds borrowed.
d)
It helps businesses manage cash flow without immediate payment.
Answer:
d) It helps businesses manage cash flow without immediate payment.
Question: Venture capital
financing is primarily associated with:
a) Funding government
infrastructure projects
b) Providing short-term
loans to established businesses
c) Investing in
early-stage startups with high growth potential
d) Assisting individuals
with personal financial planning
Answer: c) Investing in
early-stage startups with high growth potential
Question: What is the
main difference between venture capital financing and traditional bank loans?
a) Venture capital
financing requires collateral, while bank loans do not.
b) Venture capital
financing is typically provided to established businesses, while bank loans are
for startups.
c) Venture capital
financing involves equity investment in startups, while bank loans involve debt
with interest.
d) Venture capital
financing is always provided by government agencies, while bank loans are from
private banks.
Answer: c) Venture
capital financing involves equity investment in startups, while bank loans
involve debt with interest.
Question: The primary purpose
of due diligence in venture capital financing is to:
a) Assess the
creditworthiness of the startup.
b) Identify potential
exit strategies for the investor.
c) Evaluate the growth
potential and risks associated with the startup.
d) Determine the legal
structure of the startup.
Answer: c) Evaluate the
growth potential and risks associated with the startup.
Question: What is an
"exit strategy" in the context of venture capital financing?
a) The process of
withdrawing funds from the investment at regular intervals.
b) The act of selling
shares of a startup to the public through an Initial Public Offering (IPO).
c) A plan to exit the
investment and realize returns on the investment at a later stage.
d) The act of
transferring ownership of the startup to the venture capitalist.
Answer: c) A plan to exit
the investment and realize returns on the investment at a later stage.
Question: Impact
investing in venture capital refers to investments made in startups that:
a) Focus on maximizing
short-term profits and shareholder value.
b) Have a clear exit
strategy within two years of investment.
c) Demonstrate a strong
social or environmental mission alongside financial returns.
d) Operate in industries
with a long history of stable growth.
Answer: c) Demonstrate a
strong social or environmental mission alongside financial returns.
Question:
Leasing is a financial arrangement in which:
a)
The lender purchases assets and leases them to the borrower for a fixed period.
b)
The borrower purchases assets and leases them to the lender for a fixed period.
c)
The borrower borrows money from the lender and uses it to buy assets outright.
d)
The lender borrows money from the borrower and uses it to buy assets outright.
Answer:
a) The lender purchases assets and leases them to the borrower for a fixed
period.
Question:
What is the primary difference between leasing and hire purchase?
a)
Leasing involves regular rental payments, while hire purchase involves a one-time
payment.
b)
In leasing, the ownership of the asset remains with the lender, while in hire
purchase, ownership transfers to the borrower after the final payment.
c)
Leasing is a short-term financing option, while hire purchase is a long-term
financing option.
d)
Leasing is typically used for real estate, while hire purchase is used for
purchasing vehicles.
Answer:
b) In leasing, the ownership of the asset remains with the lender, while in
hire purchase, ownership transfers to the borrower after the final payment.
Question:
Which of the following is an advantage of leasing as a source of finance?
a)
Higher total cost compared to purchasing the asset outright.
b)
The lessee is responsible for maintenance and repair costs of the leased asset.
c)
It provides flexibility in upgrading to newer assets at the end of the lease
term.
d)
Lease agreements usually have a fixed interest rate.
Answer:
c) It provides flexibility in upgrading to newer assets at the end of the lease
term.
Question:
In a hire purchase agreement, the buyer:
a)
Owns the asset from the beginning and makes regular payments to the seller.
b)
Rents the asset for a fixed period and returns it at the end of the lease term.
c)
Pays the full purchase price in one lump sum at the beginning of the agreement.
d)
Can use the asset during the hire period but does not have an option to
purchase it.
Answer:
a) Owns the asset from the beginning and makes regular payments to the seller.
Question:
Which of the following is a characteristic of a hire purchase agreement?
a)
The buyer can claim tax benefits on lease payments.
b)
The seller retains ownership of the asset until the final payment is made.
c)
The buyer can return the asset at any time during the agreement.
d)
The buyer has the option to terminate the agreement without penalties.
Answer:
b) The seller retains ownership of the asset until the final payment is made.
Question: What is deferred credit?
a) A form of credit where the
borrower must repay the entire amount immediately
b) A credit arrangement with a
flexible interest rate
c) A credit facility with no
predetermined repayment schedule
d) A credit agreement allowing
delayed payment for goods or services
Answer: d) A credit agreement
allowing delayed payment for goods or services
Question: Deferred credit is
commonly utilized in which industry to attract customers and increase sales?
a) Manufacturing
b) Retail
c) Healthcare
d) Technology
Answer: b) Retail
Question: Which of the following
is a potential benefit of using deferred credit for businesses?
a) Lower interest rates compared
to regular credit arrangements
b) Immediate repayment of the
entire amount borrowed
c) Reduced risk of default by
customers
d) Longer repayment periods
Answer: c) Reduced risk of default
by customers
Question: In international trade,
which deferred credit instrument provides an assurance of payment to the
exporter, with payment guaranteed by the importer's bank?
a) Letter of credit
b) Promissory note
c) Trade credit insurance
d) Commercial paper
Answer: a) Letter of credit
Question: Deferred credit
arrangements often include penalties for late payments to encourage timely
repayment. What is the primary purpose of these penalties?
a) To earn additional profits for
the lender
b) To discourage borrowers from
using deferred credit
c) To compensate for potential
losses due to delayed payments
d) To increase the interest rate
on the credit facility
Answer: c) To compensate for
potential losses due to delayed payments
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