30 Questions
What does capital budgeting primarily deal with?
Deals with acquisition and use of capital
What is the key determinant of success for any business function?
Working capital
What is another term for the capital needed to acquire fixed assets used for a longer period?
Fixed capital
Which statement best describes the process of converting raw material into finished goods?
Product mix
What does corporate finance aim to achieve in relation to business activities?
Brings co-ordination between various business activities
True or False: Fixed capital is commonly referred to as circulating capital.
False
What is one way commercial banks assist corporate enterprises?
Granting term loans
Which of the following is NOT mentioned as a way commercial banks provide short-term finance?
Mortgage loans
What is the primary source of financing working capital for businesses in India?
Bank credit
Which scheme allows a company to overdraw funds up to a sanctioned credit limit?
Cash Credit
What determines the interest in an overdraft facility provided by commercial banks?
The actual amount withdrawn
What is the purpose of underwriting the issue of securities by commercial banks for a company?
To assist in raising capital
How does an increase in volume of sales affect the amount of working capital?
The amount of working capital increases
What is the impact of a longer production cycle on the working capital requirement?
Working capital requirement increases
During a recession, what happens to the need for working capital?
The need for working capital decreases
How does adopting a liberal credit policy for sales impact the working capital requirement?
Working capital requirement increases
What factor can help a company improve its cash flow according to the text?
Having a sound credit control policy
How does a boom in the economy affect the working capital needs of a firm?
Working capital needs increase
What does fixed capital refer to?
Capital used for acquiring fixed assets
When is fixed capital usually required by a new company?
Primarily at the time of establishment
How do companies estimate their fixed capital requirements?
By preparing a list of needed fixed assets and estimating their costs
Where can an entrepreneur obtain funds for purchasing fixed assets?
By issuing shares, debentures, or bonds
Why has estimating fixed capital requirement gained significance in recent years?
As a result of modern industrial processes requiring heavy machinery
Which type of businesses usually need to invest substantial funds in acquiring fixed assets?
Manufacturing industries and public utilities
What is another name for Authorised Capital?
Nominal Capital
Which part of the Authorised Capital is offered to prospective investors for subscription?
Issued Capital
What is Unissued Capital in relation to a company's capital structure?
Balance part of Authorised Capital not offered to the public
Which term refers to the part of Issued Capital that has been subscribed or taken up by investors?
Subscribed Capital
Can a company's Issued Capital be greater than its Authorised Capital?
No, never
What is the relationship between Subscribed Capital and Issued Capital?
Subscribed Capital can be equal to or less than Issued Capital
Test your knowledge of concepts related to capital budgeting, corporate finance, and capital structure. Match the terms with their definitions and understand key principles in financial decision-making.
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