Chapter sources-of-business-finance: Sources of Business Finance Assertion-Reason Questions | business studies Class 11 CBSE

Chapter sources-of-business-finance: Sources of Business Finance Assertion-Reason Questions | business studies Class 11 CBSE | ByteNotes.in

Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 1

Logic Check

Assertion (A): Finance is called the lifeblood of any business. Reason (R): Business requires money to carry out its various activities such as production and distribution of goods and services.

Reasoning Options

ByteNotes

Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 2

Logic Check

Assertion (A): Retained earnings is an uncertain source of funds. Reason (R): The profits of a business are fluctuating and cannot be guaranteed every year.

Reasoning Options

ByteNotes

Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 3

Logic Check

Assertion (A): Trade credit does not create any charge on the assets of a firm. Reason (R): Trade credit is extended based on the creditworthiness of the customer and not against any security of assets.

Reasoning Options

ByteNotes

Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 4

Logic Check

Assertion (A): A partnership firm can raise funds by issuing equity shares to the public. Reason (R): Equity shares can only be issued by a joint stock company.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 5

Logic Check

Assertion (A): Commercial Paper can be issued by any firm regardless of its credit rating. Reason (R): Commercial Paper is an unsecured instrument and hence accessible to all firms.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 6

Logic Check

Assertion (A): Preference shareholders have priority over equity shareholders in the repayment of capital at the time of liquidation. Reason (R): Preference shares are a type of ownership capital and carry higher risk than debentures.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 7

Logic Check

Assertion (A): Debentures do not dilute the control of equity shareholders over management. Reason (R): Debenture holders do not have voting rights in the company.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 8

Logic Check

Assertion (A): Public deposits do not dilute the control of equity shareholders. Reason (R): Depositors who provide public deposits do not enjoy voting rights in the company.

Reasoning Options

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Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 9

Logic Check

Assertion (A): GDR holders can exercise voting rights in the Indian company. Reason (R): GDRs are negotiable instruments traded freely on foreign stock exchanges.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 10

Logic Check

Assertion (A): Lease financing does not affect the debt-raising capacity of an enterprise. Reason (R): The lease agreement does not create any charge on the company's assets.

Reasoning Options

ByteNotes

Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 11

Logic Check

Assertion (A): Short-term sources of finance are most commonly used to finance current assets such as inventories and receivables. Reason (R): Short-term borrowings reduce idle capital cost and are well-matched to current asset requirements.

Reasoning Options

ByteNotes

Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 12

Logic Check

Assertion (A): Financial institutions can nominate directors to the Board of the borrowing company. Reason (R): Financial institutions provide only short-term loans and hence require tighter control.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 13

Logic Check

Assertion (A): Equity share capital is a permanent source of funds for a company. Reason (R): Equity capital needs to be repaid only at the time of liquidation of the company.

Reasoning Options

ByteNotes

Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 14

Logic Check

Assertion (A): Factoring is an expensive source when invoices are numerous but smaller in amount. Reason (R): The factor charges a fee for services like debt collection and credit control.

Reasoning Options

ByteNotes

Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 15

Logic Check

Assertion (A): Dividend paid on preference shares is tax deductible for the company. Reason (R): Preference shares carry fixed rate of dividend similar to interest on debentures.

Reasoning Options

ByteNotes

Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 16

Logic Check

Assertion (A): Commercial Paper is a freely transferable instrument with high liquidity. Reason (R): CPs are sold on an unsecured basis and are backed by assets of the issuing company.

Reasoning Options

ByteNotes

Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 17

Logic Check

Assertion (A): External sources of funds are generally more costly than internal sources. Reason (R): External sources involve payment of interest, fees, or other charges, and sometimes require mortgage of assets.

Reasoning Options

ByteNotes

Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 18

Logic Check

Assertion (A): The lessee bears the risk of obsolescence in lease financing. Reason (R): At the end of the lease period, the asset reverts to the lessor and the lessee has no ownership over it.

Reasoning Options

ByteNotes

Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 19

Logic Check

Assertion (A): New companies find it relatively difficult to obtain funds through trade credit. Reason (R): Trade credit is granted based on the creditworthiness and goodwill of the purchasing firm.

Reasoning Options

ByteNotes

Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 20

Logic Check

Assertion (A): Issue of secured debentures may adversely affect the credit worthiness of a company. Reason (R): Secured debentures create a charge on the company's assets, reducing the assets available as security for other creditors.

Reasoning Options

ByteNotes

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Chapter sections

Chapter sources-of-business-finance: Sources of Business Finance | Assertion-Reason

Assertion (A): Finance is called the lifeblood of any business. Reason (R): Business requires money to carry out its various activities such as production and distribution of goods and services.

Assertion (A): Retained earnings is an uncertain source of funds. Reason (R): The profits of a business are fluctuating and cannot be guaranteed every year.

Assertion (A): Trade credit does not create any charge on the assets of a firm. Reason (R): Trade credit is extended based on the creditworthiness of the customer and not against any security of assets.

Assertion (A): A partnership firm can raise funds by issuing equity shares to the public. Reason (R): Equity shares can only be issued by a joint stock company.

Assertion (A): Commercial Paper can be issued by any firm regardless of its credit rating. Reason (R): Commercial Paper is an unsecured instrument and hence accessible to all firms.

Assertion (A): Preference shareholders have priority over equity shareholders in the repayment of capital at the time of liquidation. Reason (R): Preference shares are a type of ownership capital and carry higher risk than debentures.

Assertion (A): Debentures do not dilute the control of equity shareholders over management. Reason (R): Debenture holders do not have voting rights in the company.

Assertion (A): Public deposits do not dilute the control of equity shareholders. Reason (R): Depositors who provide public deposits do not enjoy voting rights in the company.

Assertion (A): GDR holders can exercise voting rights in the Indian company. Reason (R): GDRs are negotiable instruments traded freely on foreign stock exchanges.

Assertion (A): Lease financing does not affect the debt-raising capacity of an enterprise. Reason (R): The lease agreement does not create any charge on the company's assets.

Assertion (A): Short-term sources of finance are most commonly used to finance current assets such as inventories and receivables. Reason (R): Short-term borrowings reduce idle capital cost and are well-matched to current asset requirements.

Assertion (A): Financial institutions can nominate directors to the Board of the borrowing company. Reason (R): Financial institutions provide only short-term loans and hence require tighter control.

Assertion (A): Equity share capital is a permanent source of funds for a company. Reason (R): Equity capital needs to be repaid only at the time of liquidation of the company.

Assertion (A): Factoring is an expensive source when invoices are numerous but smaller in amount. Reason (R): The factor charges a fee for services like debt collection and credit control.

Assertion (A): Dividend paid on preference shares is tax deductible for the company. Reason (R): Preference shares carry fixed rate of dividend similar to interest on debentures.

Assertion (A): Commercial Paper is a freely transferable instrument with high liquidity. Reason (R): CPs are sold on an unsecured basis and are backed by assets of the issuing company.

Assertion (A): External sources of funds are generally more costly than internal sources. Reason (R): External sources involve payment of interest, fees, or other charges, and sometimes require mortgage of assets.

Assertion (A): The lessee bears the risk of obsolescence in lease financing. Reason (R): At the end of the lease period, the asset reverts to the lessor and the lessee has no ownership over it.

Assertion (A): New companies find it relatively difficult to obtain funds through trade credit. Reason (R): Trade credit is granted based on the creditworthiness and goodwill of the purchasing firm.

Assertion (A): Issue of secured debentures may adversely affect the credit worthiness of a company. Reason (R): Secured debentures create a charge on the company's assets, reducing the assets available as security for other creditors.

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