Essential Unit-Wise MCQs with Answers for CBSE Class 12th Business Studies

Essential Unit-Wise MCQs with Answers for CBSE Class 12th Business Studies

Unit 1: Nature and Purpose of Business

MCQs

  1. Business activities are primarily divided into:
    a) Economic and non-economic activities
    b) Trade and commerce
    c) Profit-making and non-profit-making activities
    d) Primary and secondary industries
    Answer: a) Economic and non-economic activities
  2. Which of the following is NOT a characteristic of business?
    a) Profit motive
    b) Risk involvement
    c) Manufacturing only
    d) Economic activity
    Answer: c) Manufacturing only
  3. The primary objective of a business is:
    a) Gaining monopoly
    b) Maximizing profits
    c) Serving society
    d) Employee satisfaction
    Answer: b) Maximizing profits
  4. Which is an example of an economic activity?
    a) Playing for leisure
    b) Teaching in a school for salary
    c) Cooking for family
    d) Volunteering at a charity
    Answer: b) Teaching in a school for salary
  5. A person who runs a business for profit is called:
    a) An employee
    b) An entrepreneur
    c) A consumer
    d) A trader
    Answer: b) An entrepreneur
  6. Which of the following is a feature of commerce?
    a) Manufacturing goods
    b) Risk-free operations
    c) Exchange of goods and services
    d) Agricultural activity
    Answer: c) Exchange of goods and services
  7. Commerce is divided into:
    a) Primary and secondary sectors
    b) Internal and external trade
    c) Industry and business services
    d) Banking and manufacturing
    Answer: b) Internal and external trade
  8. Internal trade includes:
    a) Import and export
    b) Wholesale and retail trade
    c) Manufacturing and distribution
    d) Banking and insurance
    Answer: b) Wholesale and retail trade
  9. Which of the following is an auxiliary to trade?
    a) Manufacturing
    b) Farming
    c) Insurance
    d) Construction
    Answer: c) Insurance
  10. The primary industry involves:
    a) Mining and quarrying
    b) Manufacturing steel
    c) Selling groceries
    d) Providing IT services
    Answer: a) Mining and quarrying
  11. Which of these is NOT a type of trade?
    a) Wholesale
    b) Retail
    c) Manufacturing
    d) External trade
    Answer: c) Manufacturing
  12. Business activities include:
    a) Providing goods and services to satisfy human needs
    b) Always working for charity
    c) Involvement in criminal activities
    d) None of the above
    Answer: a) Providing goods and services to satisfy human needs
  13. What differentiates business from profession and employment?
    a) Higher income
    b) Ownership and profit motive
    c) Regular work hours
    d) Lack of risk
    Answer: b) Ownership and profit motive
  14. Business risks arise due to:
    a) Certainty of profit
    b) Factors beyond control
    c) Government guarantees
    d) Fixed demand
    Answer: b) Factors beyond control
  15. “Auxiliaries to trade” include all EXCEPT:
    a) Insurance
    b) Transportation
    c) Manufacturing
    d) Warehousing
    Answer: c) Manufacturing
  16. The primary objective of a business is to:
    a) Help the environment
    b) Create employment
    c) Make profit
    d) Provide free goods
    Answer: c) Make profit
  17. Commerce can be broadly classified into:
    a) Production and consumption
    b) Banking and warehousing
    c) Trade and auxiliaries to trade
    d) Goods and services
    Answer: c) Trade and auxiliaries to trade
  18. Business ethics is related to:
    a) Maximizing profits at all costs
    b) Maintaining honesty and fairness in business
    c) Avoiding risk altogether
    d) Providing cheap products to consumers
    Answer: b) Maintaining honesty and fairness in business
  19. Risk is an essential characteristic of business because:
    a) It ensures consistent profit
    b) It involves uncertainty
    c) It eliminates competition
    d) It guarantees success
    Answer: b) It involves uncertainty
  20. The role of profit in business includes:
    a) Indicating efficiency of operations
    b) Serving as a measure of wealth
    c) Encouraging unethical practices
    d) Ensuring customer satisfaction
    Answer: a) Indicating efficiency of operations

Unit 2: Forms of Business Organizations


MCQs

  1. The simplest and most common form of business organization is:
    a) Partnership
    b) Sole proprietorship
    c) Cooperative society
    d) Company
    Answer: b) Sole proprietorship
  2. The main feature of a sole proprietorship is:
    a) Limited liability
    b) Single ownership
    c) Separate legal identity
    d) Perpetual existence
    Answer: b) Single ownership
  3. What is a major limitation of sole proprietorship?
    a) Lack of direct control
    b) Complex decision-making process
    c) Limited capital
    d) Heavy government regulations
    Answer: c) Limited capital
  4. A partnership is formed by:
    a) Written agreement only
    b) Oral or written agreement
    c) Government authorization
    d) Automatic consent
    Answer: b) Oral or written agreement
  5. The minimum number of partners required to form a partnership is:
    a) 1
    b) 2
    c) 5
    d) 7
    Answer: b) 2
  6. In a partnership, the liability of partners is:
    a) Limited to their investment
    b) Unlimited
    c) Limited for active partners only
    d) Limited for sleeping partners only
    Answer: b) Unlimited
  7. A partnership registered under the Indian Partnership Act is:
    a) A private company
    b) A public limited company
    c) A legal entity
    d) Not a separate legal entity
    Answer: d) Not a separate legal entity
  8. Which type of partnership is formed for a specific purpose or time?
    a) Active partnership
    b) General partnership
    c) Limited liability partnership
    d) Particular partnership
    Answer: d) Particular partnership
  9. A dormant partner is also known as:
    a) Active partner
    b) Nominal partner
    c) Sleeping partner
    d) Secret partner
    Answer: c) Sleeping partner
  10. The Hindu Undivided Family business is governed by:
    a) Hindu Marriage Act
    b) Hindu Succession Act
    c) Indian Companies Act
    d) Indian Partnership Act
    Answer: b) Hindu Succession Act
  11. The person managing the Hindu Undivided Family business is called:
    a) Managing Director
    b) Proprietor
    c) Karta
    d) Trustee
    Answer: c) Karta
  12. Cooperative societies are based on the principle of:
    a) Profit maximization
    b) Voluntary association and service
    c) Private ownership
    d) Individual decision-making
    Answer: b) Voluntary association and service
  13. A cooperative society is required to be registered under:
    a) Companies Act
    b) Cooperative Societies Act
    c) Contract Act
    d) Partnership Act
    Answer: b) Cooperative Societies Act
  14. The liability of members in a cooperative society is:
    a) Unlimited
    b) Limited to their capital contribution
    c) Joint and several
    d) None of the above
    Answer: b) Limited to their capital contribution
  15. A private company must have a minimum of:
    a) 2 members
    b) 5 members
    c) 7 members
    d) 50 members
    Answer: a) 2 members
  16. The maximum number of members in a private company is:
    a) 20
    b) 50
    c) 100
    d) 200
    Answer: d) 200
  17. A company that has a single owner and acts as a legal entity is called:
    a) Public company
    b) Private company
    c) One Person Company
    d) Partnership firm
    Answer: c) One Person Company
  18. The process of forming a company does NOT include:
    a) Promotion
    b) Registration
    c) Memorandum of Association
    d) Partnership deed
    Answer: d) Partnership deed
  19. Which document defines the scope of a company’s operations?
    a) Articles of Association
    b) Memorandum of Association
    c) Prospectus
    d) Share certificate
    Answer: b) Memorandum of Association
  20. The choice of business organization depends on factors such as:
    a) Market size only
    b) Capital requirements and risk involvement
    c) Government rules only
    d) The number of employees
    Answer: b) Capital requirements and risk involvement

Unit 3: Public, Private, and Global Enterprises


MCQs

  1. A public sector enterprise is owned by:
    a) Private individuals
    b) State or Central Government
    c) Foreign investors
    d) Partnership firms
    Answer: b) State or Central Government
  2. Which of the following is NOT a feature of a public sector enterprise?
    a) Government ownership
    b) Profit-oriented motive
    c) Public accountability
    d) Service motive
    Answer: b) Profit-oriented motive
  3. The main objective of private sector enterprises is:
    a) Providing public services
    b) Profit maximization
    c) Reducing inequality
    d) Promoting social welfare
    Answer: b) Profit maximization
  4. The key characteristic of a departmental undertaking is:
    a) Autonomy in decision-making
    b) Owned and managed by a ministry
    c) Limited government control
    d) Existence as a separate legal entity
    Answer: b) Owned and managed by a ministry
  5. Which of the following is an example of a departmental undertaking?
    a) Indian Railways
    b) ONGC
    c) Life Insurance Corporation (LIC)
    d) Tata Steel
    Answer: a) Indian Railways
  6. A statutory corporation is established under:
    a) Company law
    b) A special act of Parliament or State Legislature
    c) The Partnership Act
    d) Cooperative Societies Act
    Answer: b) A special act of Parliament or State Legislature
  7. Which of the following is a statutory corporation?
    a) Indian Oil Corporation
    b) State Bank of India
    c) Air India
    d) Reserve Bank of India
    Answer: d) Reserve Bank of India
  8. A government company is defined under:
    a) Companies Act, 2013
    b) Partnership Act, 1932
    c) Contract Act, 1872
    d) Cooperative Societies Act, 1912
    Answer: a) Companies Act, 2013
  9. The minimum government shareholding in a government company is:
    a) 25%
    b) 50%
    c) 51%
    d) 75%
    Answer: c) 51%
  10. The main feature of a global enterprise is:
    a) Limited geographical presence
    b) Operating in multiple countries
    c) Sole ownership by the government
    d) Focusing only on local markets
    Answer: b) Operating in multiple countries
  11. Which of the following is NOT a feature of global enterprises?
    a) Huge capital investment
    b) Centralized management
    c) Use of advanced technology
    d) Restricted to one country
    Answer: d) Restricted to one country
  12. Which of the following is an example of a global enterprise?
    a) Infosys
    b) Apple Inc.
    c) SBI
    d) Dabur
    Answer: b) Apple Inc.
  13. A joint venture is formed when:
    a) One company acquires another
    b) Two or more companies collaborate for a common goal
    c) A company goes public
    d) An enterprise is run solely by the government
    Answer: b) Two or more companies collaborate for a common goal
  14. Which of these is NOT an advantage of a joint venture?
    a) Sharing of resources
    b) Limited risk
    c) Full control by one partner
    d) Access to new markets
    Answer: c) Full control by one partner
  15. Public-Private Partnership (PPP) aims to:
    a) Reduce private sector involvement in infrastructure
    b) Increase public sector monopoly
    c) Provide better services through shared responsibilities
    d) Eliminate government participation in businesses
    Answer: c) Provide better services through shared responsibilities
  16. Which of the following is a key feature of a Public-Private Partnership?
    a) Complete private ownership
    b) Risk-sharing between public and private sectors
    c) No involvement of private investment
    d) Sole focus on profits
    Answer: b) Risk-sharing between public and private sectors
  17. A drawback of public sector enterprises is:
    a) Low social accountability
    b) High operational efficiency
    c) Bureaucratic interference
    d) Lack of infrastructure
    Answer: c) Bureaucratic interference
  18. Which of the following is NOT a public sector objective?
    a) Providing essential services
    b) Generating employment
    c) Ensuring regional balance
    d) Maximizing profits
    Answer: d) Maximizing profits
  19. The private sector plays a key role in:
    a) Providing free public services
    b) Driving innovation and competition
    c) Enforcing government policies
    d) Ensuring social welfare
    Answer: b) Driving innovation and competition
  20. Public sector enterprises are criticized for:
    a) Efficient management
    b) Quick decision-making
    c) Red tape and inefficiency
    d) Generating high profits
    Answer: c) Red tape and inefficiency

Unit 4: Business Services


MCQs

  1. Business services primarily deal with:
    a) Manufacturing products
    b) Providing support and facilities to businesses
    c) Agricultural activities
    d) Mining and extraction
    Answer: b) Providing support and facilities to businesses
  2. Which of the following is NOT a type of business service?
    a) Banking
    b) Warehousing
    c) Insurance
    d) Farming
    Answer: d) Farming
  3. Which of the following is a feature of business services?
    a) Tangibility
    b) Inseparability
    c) Ownership transfer
    d) Homogeneity
    Answer: b) Inseparability
  4. The main role of banking services is to:
    a) Manufacture goods
    b) Facilitate trade and commerce
    c) Provide farming tools
    d) Manage transportation
    Answer: b) Facilitate trade and commerce
  5. Which type of bank account is most suitable for frequent transactions?
    a) Fixed deposit account
    b) Recurring deposit account
    c) Current account
    d) Savings account
    Answer: c) Current account
  6. A recurring deposit account is primarily used for:
    a) Daily transactions
    b) Large deposits
    c) Saving fixed amounts periodically
    d) Obtaining loans
    Answer: c) Saving fixed amounts periodically
  7. Which of the following is an advantage of e-banking?
    a) Manual banking processes
    b) Limited accessibility
    c) 24/7 service availability
    d) High operational cost
    Answer: c) 24/7 service availability
  8. What is a key feature of insurance services?
    a) Transfer of risk
    b) Guaranteed profit
    c) Risk creation
    d) Ownership transfer
    Answer: a) Transfer of risk
  9. Which of the following is NOT a principle of insurance?
    a) Utmost good faith
    b) Insurable interest
    c) Doctrine of indemnity
    d) Unlimited liability
    Answer: d) Unlimited liability
  10. The principle of indemnity applies to:
    a) Life insurance
    b) Marine insurance
    c) Fire and general insurance
    d) All types of insurance
    Answer: c) Fire and general insurance
  11. Marine insurance covers:
    a) Risks related to air transport
    b) Risks related to sea transport
    c) Risks related to agriculture
    d) Risks related to factories
    Answer: b) Risks related to sea transport
  12. The principle of utmost good faith in insurance means:
    a) Insurer can hide important details
    b) Policyholders must disclose all relevant information
    c) Risk is borne only by the insurer
    d) Premium is fixed arbitrarily
    Answer: b) Policyholders must disclose all relevant information
  13. Postal services include:
    a) Manufacturing goods
    b) Registered post and speed post services
    c) Providing bank loans
    d) Offering insurance policies
    Answer: b) Registered post and speed post services
  14. Which of the following is NOT a type of digital payment?
    a) UPI
    b) Debit card
    c) Fixed deposit
    d) Mobile wallets
    Answer: c) Fixed deposit
  15. Warehousing provides which type of utility?
    a) Form utility
    b) Place utility
    c) Time utility
    d) Ownership utility
    Answer: c) Time utility
  16. A cash credit facility is provided by banks for:
    a) Fixed deposits
    b) Short-term working capital needs
    c) Personal loans
    d) Long-term investments
    Answer: b) Short-term working capital needs
  17. Which of these is NOT a type of insurance?
    a) Life insurance
    b) Health insurance
    c) Product insurance
    d) Fire insurance
    Answer: c) Product insurance
  18. E-banking involves:
    a) Use of digital platforms for banking services
    b) Manual handling of cash transactions
    c) Paper-based transaction methods
    d) Banking without any technology
    Answer: a) Use of digital platforms for banking services
  19. Business services are crucial for:
    a) Production of goods only
    b) Facilitating trade and commerce
    c) Employing labor directly
    d) Limiting business risks
    Answer: b) Facilitating trade and commerce
  20. A key role of transportation in business services is to:
    a) Store goods
    b) Reduce demand
    c) Deliver goods to the market
    d) Manufacture products
    Answer: c) Deliver goods to the market

Unit 5: Emerging Modes of Business


MCQs

  1. E-business refers to:
    a) Traditional business methods
    b) Conducting business using the internet and digital platforms
    c) Manufacturing electronic products
    d) Using physical stores for sales
    Answer: b) Conducting business using the internet and digital platforms
  2. Which of the following is NOT a characteristic of e-business?
    a) Global reach
    b) Reduced transaction cost
    c) Limited to local markets
    d) Convenience
    Answer: c) Limited to local markets
  3. The primary advantage of e-business is:
    a) Higher operational costs
    b) Limited customer access
    c) Increased convenience for customers
    d) Dependency on physical infrastructure
    Answer: c) Increased convenience for customers
  4. Which of the following is an example of e-business?
    a) Retail store sales
    b) Online shopping platforms
    c) Factory production
    d) Paper-based inventory management
    Answer: b) Online shopping platforms
  5. B2C (Business-to-Consumer) transactions are exemplified by:
    a) A wholesaler selling to retailers
    b) A manufacturer selling directly to consumers online
    c) Two companies collaborating
    d) A supplier providing raw materials to a factory
    Answer: b) A manufacturer selling directly to consumers online
  6. B2B (Business-to-Business) e-commerce involves:
    a) Selling products to end consumers
    b) Transactions between two businesses
    c) Government-to-business interactions
    d) Employee-to-business transactions
    Answer: b) Transactions between two businesses
  7. Which of the following is NOT an example of digital payment?
    a) UPI
    b) Credit card
    c) Cash on delivery
    d) Mobile wallets
    Answer: c) Cash on delivery
  8. E-procurement involves:
    a) Online purchasing of goods and services by businesses
    b) Manual ordering of supplies
    c) Delivering goods physically to customers
    d) Cash transactions at a retail store
    Answer: a) Online purchasing of goods and services by businesses
  9. What does e-tailing refer to?
    a) Online retailing of goods and services
    b) Selling through physical stores
    c) Import and export of goods
    d) Wholesale business operations
    Answer: a) Online retailing of goods and services
  10. Which of the following is a limitation of e-business?
    a) Limited market reach
    b) High cost of digital transactions
    c) Dependency on technology and internet connectivity
    d) Lack of flexibility
    Answer: c) Dependency on technology and internet connectivity
  11. Which of the following is an ethical concern in e-business?
    a) Increased competition
    b) Privacy and data security issues
    c) Faster delivery of goods
    d) Lower operational costs
    Answer: b) Privacy and data security issues
  12. A payment gateway is:
    a) A bank providing loans
    b) A service that facilitates online payments between buyers and sellers
    c) A physical transaction method
    d) A form of digital currency
    Answer: b) A service that facilitates online payments between buyers and sellers
  13. E-business helps reduce operational costs by:
    a) Increasing the number of physical stores
    b) Eliminating intermediaries and paper-based processes
    c) Increasing inventory size
    d) Decreasing the quality of products
    Answer: b) Eliminating intermediaries and paper-based processes
  14. A key feature of e-business is:
    a) Limited operational hours
    b) High dependency on cash
    c) 24/7 availability
    d) Localized sales
    Answer: c) 24/7 availability
  15. M-commerce refers to:
    a) E-commerce conducted using mobile devices
    b) Manufacturing commerce products
    c) Manual commerce processes
    d) Government regulations for businesses
    Answer: a) E-commerce conducted using mobile devices
  16. Which of the following is a benefit of e-business?
    a) Time constraints
    b) Increased geographical reach
    c) Limited customer interaction
    d) High transaction cost
    Answer: b) Increased geographical reach
  17. C2C (Consumer-to-Consumer) e-commerce is best demonstrated by:
    a) A company selling directly to customers
    b) Customers selling products to other customers via online platforms
    c) Business-to-government transactions
    d) Large-scale wholesale operations
    Answer: b) Customers selling products to other customers via online platforms
  18. Which of the following is an example of outsourcing in e-business?
    a) Developing software in-house
    b) Hiring external IT services for website maintenance
    c) Building physical warehouses
    d) Delivering goods through personal vehicles
    Answer: b) Hiring external IT services for website maintenance
  19. E-business eliminates the need for:
    a) Internet services
    b) Physical infrastructure for storing data
    c) Face-to-face interaction in transactions
    d) Technology investment
    Answer: c) Face-to-face interaction in transactions
  20. E-business differs from traditional business in terms of:
    a) Focus on physical stores
    b) Dependency on paper-based processes
    c) Utilization of electronic and online channels
    d) Limited customer reach
    Answer: c) Utilization of electronic and online channels

Unit 6: Social Responsibility of Business and Business Ethics


MCQs

  1. Social responsibility in business refers to:
    a) Maximizing profits at all costs
    b) Legal and ethical obligations towards society
    c) Increasing production only
    d) Avoiding government regulations
    Answer: b) Legal and ethical obligations towards society
  2. Which of the following is NOT a reason for businesses to adopt social responsibility?
    a) Social expectations
    b) Profit maximization
    c) Ethical obligations
    d) Sustainability concerns
    Answer: b) Profit maximization
  3. Businesses are expected to protect the environment by:
    a) Increasing industrial pollution
    b) Implementing eco-friendly practices
    c) Ignoring environmental laws
    d) Reducing costs at the expense of nature
    Answer: b) Implementing eco-friendly practices
  4. Social responsibility towards employees includes:
    a) Increasing working hours without benefits
    b) Providing fair wages and safe working conditions
    c) Exploiting their labor for higher profits
    d) Reducing wages to minimize costs
    Answer: b) Providing fair wages and safe working conditions
  5. A business shows responsibility towards consumers by:
    a) Misleading advertisements
    b) Ensuring the quality and safety of products
    c) Exploiting customers for profit
    d) Ignoring customer complaints
    Answer: b) Ensuring the quality and safety of products
  6. Responsibility towards the government involves:
    a) Evading taxes
    b) Following laws and paying taxes regularly
    c) Avoiding regulations
    d) Reducing transparency
    Answer: b) Following laws and paying taxes regularly
  7. The primary role of business ethics is to:
    a) Maximize business profits
    b) Ensure fair and honest practices in business operations
    c) Reduce competition
    d) Promote unethical behavior
    Answer: b) Ensure fair and honest practices in business operations
  8. Which of the following is an element of business ethics?
    a) Cheating customers
    b) Transparency in operations
    c) Corruption
    d) Tax evasion
    Answer: b) Transparency in operations
  9. Businesses should prioritize social responsibility to:
    a) Gain public trust and support
    b) Reduce operational costs
    c) Avoid paying taxes
    d) Eliminate competitors
    Answer: a) Gain public trust and support
  10. Social responsibility towards the community includes:
    a) Generating employment opportunities
    b) Ignoring local issues
    c) Polluting the environment
    d) Avoiding social welfare activities
    Answer: a) Generating employment opportunities
  11. A business is fulfilling its ethical responsibility when it:
    a) Produces low-quality goods
    b) Reduces prices through unethical means
    c) Adheres to fair trade practices
    d) Engages in false advertising
    Answer: c) Adheres to fair trade practices
  12. Business ethics is based on:
    a) Profit-only motives
    b) Legal obligations and moral principles
    c) Avoiding transparency
    d) Exploiting natural resources
    Answer: b) Legal obligations and moral principles
  13. Which of the following groups is NOT a focus of business responsibility?
    a) Consumers
    b) Competitors
    c) Employees
    d) Investors
    Answer: b) Competitors
  14. Ethical business practices benefit the organization by:
    a) Reducing trust among stakeholders
    b) Enhancing the company’s reputation
    c) Decreasing employee satisfaction
    d) Increasing corruption
    Answer: b) Enhancing the company’s reputation
  15. Environmental protection as a responsibility of business includes:
    a) Increasing carbon emissions
    b) Promoting renewable energy use
    c) Avoiding waste management practices
    d) Ignoring climate change
    Answer: b) Promoting renewable energy use
  16. Social responsibility towards investors includes:
    a) Hiding financial information
    b) Providing accurate and transparent financial reports
    c) Avoiding dividend payments
    d) Misusing investor funds
    Answer: b) Providing accurate and transparent financial reports
  17. Which of the following is NOT a benefit of fulfilling social responsibility?
    a) Enhanced brand image
    b) Increased consumer loyalty
    c) Higher costs due to ethical practices
    d) Better employee retention
    Answer: c) Higher costs due to ethical practices
  18. Ethical businesses ensure their activities:
    a) Exploit customers
    b) Harm the environment
    c) Benefit society and stakeholders
    d) Are profit-driven only
    Answer: c) Benefit society and stakeholders
  19. Social responsibility helps businesses in:
    a) Ignoring public concerns
    b) Strengthening community relations
    c) Reducing market competition
    d) Avoiding ethical concerns
    Answer: b) Strengthening community relations
  20. The ultimate goal of social responsibility and ethics in business is to:
    a) Maximize short-term profits
    b) Promote sustainable growth and social welfare
    c) Exploit natural and human resources
    d) Ignore stakeholder interests
    Answer: b) Promote sustainable growth and social welfare

Unit 7: Sources of Business Finance


MCQs

  1. Business finance refers to:
    a) Managing business operations
    b) Funds required for carrying out business activities
    c) Creating new business ideas
    d) Developing production techniques
    Answer: b) Funds required for carrying out business activities
  2. The capital contributed by owners in a business is called:
    a) Borrowed funds
    b) Retained earnings
    c) Owner’s funds
    d) Trade credit
    Answer: c) Owner’s funds
  3. Borrowed funds refer to:
    a) Funds raised from the public
    b) Funds obtained from external sources with an obligation to repay
    c) Equity capital
    d) Capital invested by promoters
    Answer: b) Funds obtained from external sources with an obligation to repay
  4. Which of the following is NOT an example of owner’s funds?
    a) Equity shares
    b) Preference shares
    c) Retained earnings
    d) Bank loans
    Answer: d) Bank loans
  5. Debentures represent:
    a) Ownership capital
    b) Borrowed capital
    c) Reserves of the company
    d) Working capital
    Answer: b) Borrowed capital
  6. Which of the following is a feature of equity shares?
    a) Fixed rate of dividend
    b) Voting rights
    c) Redeemable after a fixed period
    d) Priority in repayment during liquidation
    Answer: b) Voting rights
  7. Preference shares are called so because:
    a) They are issued to preferred customers
    b) They get preference in dividend payment and repayment during liquidation
    c) They are always non-redeemable
    d) They have the highest risk
    Answer: b) They get preference in dividend payment and repayment during liquidation
  8. Retained earnings refer to:
    a) Dividends paid to shareholders
    b) Profits reinvested in the business
    c) Funds borrowed from banks
    d) Cash held for emergencies
    Answer: b) Profits reinvested in the business
  9. Which of the following is NOT a source of borrowed funds?
    a) Debentures
    b) Public deposits
    c) Loans from financial institutions
    d) Equity shares
    Answer: d) Equity shares
  10. Trade credit is typically used for:
    a) Long-term investments
    b) Purchasing goods on credit from suppliers
    c) Paying dividends
    d) Buying fixed assets
    Answer: b) Purchasing goods on credit from suppliers
  11. Public deposits are:
    a) Deposits made by the government
    b) Loans raised from the general public by businesses
    c) Capital invested by shareholders
    d) Short-term funds provided by financial institutions
    Answer: b) Loans raised from the general public by businesses
  12. A loan provided by a financial institution is categorized as:
    a) Owner’s funds
    b) Borrowed funds
    c) Retained earnings
    d) Trade credit
    Answer: b) Borrowed funds
  13. Inter-Corporate Deposits (ICDs) are:
    a) Loans extended by one company to another
    b) Deposits made by customers in banks
    c) Deposits held in savings accounts
    d) Government grants to businesses
    Answer: a) Loans extended by one company to another
  14. What is the major advantage of equity shares?
    a) Fixed dividends
    b) Voting rights for shareholders
    c) Priority in repayment
    d) Tax exemption
    Answer: b) Voting rights for shareholders
  15. The interest on debentures is:
    a) Paid only in profitable years
    b) Compulsory, regardless of profits
    c) Decided by shareholders
    d) Not mandatory
    Answer: b) Compulsory, regardless of profits
  16. Which of the following is a long-term source of finance?
    a) Commercial paper
    b) Bank overdraft
    c) Equity shares
    d) Trade credit
    Answer: c) Equity shares
  17. Public deposits are more suitable for:
    a) Large-scale industries requiring short-term funds
    b) Small businesses with minimal capital requirements
    c) Non-profit organizations
    d) Private loans for individuals
    Answer: a) Large-scale industries requiring short-term funds
  18. Borrowed funds typically carry:
    a) Voting rights
    b) Obligation to pay interest
    c) No repayment obligation
    d) Higher dividends
    Answer: b) Obligation to pay interest
  19. The primary benefit of retained earnings is:
    a) No obligation to repay or pay interest
    b) High costs of procurement
    c) Reduction in ownership capital
    d) Fixed rate of return
    Answer: a) No obligation to repay or pay interest
  20. Which of the following factors influences the choice of a financing source?
    a) Cost of funds
    b) Nature of the business
    c) Risk involved
    d) All of the above
    Answer: d) All of the above

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