Commercial Bills and Commercial Paper

Q.

Explain the various money market instruments.

Q.

What is contingent goods?

Q.

Which of the following statements is not true with regard to call money?

1. Its maturity period ranges from one day to fifteen days.

2. It is used for inter-bank transactions.

3. There is a direct relationship between call rates and other short-term money market instruments.

4. It is short-term finance repayable on demand.

Q.

Briefly discuss the informational needs of any three external users.

Q.

When a trade bill is accepted by a commercial bank, it is known as a _____

1. None of these

2. Commercial Bill

3. Call money

4. Certificate of deposit

Q.

When the trade bill is accepted by commercial banks, it is known as a commercial bill. State true or false.

1. True

2. False

Q.

Which of the following is a feature of demonetisation?

1. Development of a less-cash economy.

2. Channelising savings into the formal financial system.

3. Tax administration measure.

4. All of the above.

Q.

'An instrument is transferable by endorsement and delivery. It is sold at a discount and redeemed at par'. Identify the instrument.

1. Commercial Bill

2. Commercial Paper

3. T-Bill

4. Call Money

Q. Ais a form of bills of exchange used to finance the working capital of firms.

1. Commercial paper
2. Commercial Bill
3. Call money
4. T-Bill

Q.

A commercial bill is used to ____________

1. Meet the short term debt

2. Pay the interest

3. Finance the working capital requirements

4. Meet the long term debt

Q. ' Rakesh Steel Lts.' is a large and creditworthy company manufacturing steel for the Indian market. It now wants to cater to the Asian market and decides to invest in new hi-tech machines. Since the investment is large, it requires long term finance. It decides to raise funds by issuing equity shares. the issue of equity shares involves huge flotation cost. To meet the expenses of flotation cost the company decides to tap the money market.

Name the money market instrument the company can use for the above purpose.

1. Call Money
2. Commercial Paper
3. Treasury Bill
4. Comemrcial Bill

Q.

"Mission Coach" is a large creditworthy company manufacturing coaches for Indian Railways. It now wants to export these coaches to other countries and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expense of floatation cost, the company decides to tap the money market.

(i) Name and explain the money market instrument the company can use for the above purpose.

(ii) What is the duration for which the company can get funds through the instrument?

(iii) State any other purpose for which this instrument can be used.

Q.

Is preference share a money market instrument?

Q.

'S' Ltd. is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is at about 7-8% and the demand for steel is growing. It is planning to set-up a new steel plant to capitalise on the increased demand. It is estimated that it will require about Rs 5000 crores to set-up and about Rs 500 crores of working capital to start the new plant. Explain the importance of having a financial plan for this company. Give an imaginary plan to support your answer.

Q. A __________ is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms.

1. money market
2. treasury bill
3. certificate of deposit
4. commercial bill

Q. When a trade bill is accepted by a commercial bank, it is known as a _____.

1. Certificate of deposit
2. Commercial Bill
3. Call money
4. None of these

Q. What is meant by a 'Commercial Paper'?

Q. Commercial paper matures in .

1. 1 day - 7 days
2. upto 15 days
3. 15 days - 1 year
4. 10 days

Q. _______ is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms.

1. Commercial Bill
2. Treasury Bill
3. Call money
4. None of the above

Q. cost is the cost incurred by a company to offer securities to the public.

1. Fixed
2. Recurring
3. Variable
4. Floatation

Q.

Can you use a home equity loan for anything?

Q. The money market is a market for __________ funds which deals in monetary assets whose period of maturity is upto one year.

1. long-term
2. medium-term
3. nano-term
4. short-term

Q. ________ is a person or association of persons in whose favor the letter of credit is opened.

1. Applicant
2. Beneficiary
3. Issuing bank
4. Advising bank
5. None of the above

Q. The time of payment of a negotiable instrument need not be certain.

1. True
2. False

Q. ______ has full authority to perform all functions relating to the business on behalf of his principal.

1. General Mercantile Agents
2. Special/Particular Mercantile Agent
3. Commission Agent
4. Del Credere Agent

Q. Why debt is considered as cheapest source of finance not retained earning ?