Trade Credit

Q.

Explain trade credit and bank credit as sources of short term finance for business enterprises.

Q.

What advantages does issue of debentures provide over the issue of equity shares?

Q.

Define debenture. Explain its three merits.

Q.

What do you mean by owner's fund? When is it not suitable?

Q.

Write any three points of difference between owner's fund and borrowed fund.

Q.

What is a letter of credit? Why does an exporter need this document?

Q.

Which one of the following facilitates easy purchase of goods and services without making immediate payment?

1. Equity Shares

2. Preference Shares

3. Trade Credit

4. Debentures

Q.

Which is the source of finance that is available in the normal course of purchase of goods?

1. Equity Shares

2. Debentures

3. Trade Credit

4. All of the above

Q.

Which of the following is not a source of borrowed funds?

1. Debentures

2. Public deposits

3. Retained earnings

4. Loans from financial institutions

Q.

Rahul Fashion, a reputed garment manufacturing unit needs to fund its day-to-day expenses, like wages, rent and maintaining a stock of raw material. The owner approached his raw material supplier to give them credit for two months so that he can get cloth for making garments without making immediate payment. The supplier made an enquiry regarding Rahul and found that his reputation of giving payment is not very good. In the past, lenders were not very happy.

What is the source of finance Rahul is trying to get?

1. Factoring

2. Trade Credit

3. Equity Shares

4. None of the above

Q. refers to an arrangement where the manufacturer is granted credit from the supplier of raw materials, inputs, spare parts, etc.

1. Trade Credit
2. Public Deposit
3. Equity Share
4. Debentures

Q.

(a) Discuss any three characteristics of debentures.

(b) Discuss any three limitations of retained earning as a source of Finance.

Q.

Which one of the following is a convenient and continuous source of finance?

1. Preference shares

2. Debentures

3. Equity Shares

4. Trade Credit

Q.

Give an example of borrowed funds.

Q.

What are owner funds and borrowed funds?

Q. "Equity shares and debentures play a very important role in long term credit." What are they? How do they help?

Q. Which among the following is not the source of short term finance?

1. Trade credit
2. Customers advances
3. Installment credit
4. Equity financing

Q. differentiate between shares and debentures as sources of long term finance

Q. The duration of trade credit is months.

1. 1 to 2
2. 2 to 4
3. 3 to 6
4. 5 to 10

Q. A letter of credit refers to ________________________.

1. A letter sent by importer to exporter sanctioning credit deal
2. A letter sent by exporter to importer sanctioning credit deal
3. A letter containing condition of credit purchase
4. A bank agreeing to accept and pay on due date.

Q. Match the list 1 with list 2.

Q. What is meant by 'Money Market'?