FINANCIAL SYSTEMS AND SERVICES

MULTIPLE CHOICES – UNIT 1

1. Financial ---------------- involves the design , development
and the implementation of innovative financial instruments
and solutions to problems in finance
a. Analysis c. c. Management
b. Engineering d. accounting

2. Financial Engineers play ------ roles.

a. One c. Three
b. Two d. Four
3. The deal makers --------- a deal to serve the client‘s needs and
them to the client.
a. Form c. value
b. Structure d. pool
4. ------------ are those who create new products and process.
a. Innovators c. Managers
d. a&b
b. b. Achievers

5. The outlaws look to exploit ----------------------.

a. Loopholes c. Targets
b. Achievements d. Goals
6. The tools used by financial engineers are broadly divided into
----------- categories.
a. One c. Three
b. Two d. Four
7. The --------------- tools involve the ideas and concepts which
underlie finance as a formal discipline.
a. Subjective c. object
b. Conceptual d. Physical
8. The ---------------- tools are valuation theory, portfolio theory,
hedging, accounting relationships and tax treatment.
a. Subjective c. Object
b. Physical d. Conceptual

9. The ------------ tools of the financial engineers include the

processes which can be pieced together to accomplish some
specific purpose.
a. Subject c. Object
b. Physical d. Concept
10. The Instruments of --------------- tools are fixed income
securities, equity, future, options and swaps.
a. Subject c. object
b. Concept d. Physical
11. The Processes of ---------- tools are Securities Trading,
Electronic Funds Transfer and Shelf Registration.
a. Subject c. Object
b. Physical d. Concept
12. ------------ is defined as a process or method of studying the
nature of something in order to determine its essential
features and relationships.
a. Analysis c. Engineering
b. Description d. a&c
13. A Financial ------------- is engaged in the practice of financial
analysis.
a. Analyst c. Manager
b. Engineer d. Auditor
14. Financial ----------- is an application of investment
technology in an effort to solve financial problem.
a. Analysis c. Management
b. Engineering d. accounting
15. Financial ----------- are employed by Investment Banks,
Commercial Banks and various financial intermediaries.
a. Analysts c. Managers
b. Engineers d. Auditors
16. Financial Engineers are responsible for financial
-----------------.
 a. Construction c. Innovation
b. Settlement
d. accounting
17. Financial Analysts ----------------- the structures in order to
understand them.
a. Decompose c. demolish
b. Restructure d. b&c

18. Financial Engineer uses his knowledge of the relevant theory,

instruments and processes together in finding out the problem
and solution.
a. Analyst c. Manager
b. ----------------- d. Auditor

19. The basic need for financial engineering is to ----------- the

funds necessary for the operation of large scale business.
a. Distribute c. Secure
b. protect d. Finance
20. Financial Engineers are involved in corporate finance,
trading¸ Investment and -------------- management.
a. Money c. property
b. Account d. Instrument
21. ------------- Banker is financial intermediaries who helps to
transfer capital from those who possess it to those need it.
 a. Investment c. Modern
b. Traditional d. Merchant

22. ------------ banking includes wide range of activities i.e.

management of customers securities, portfolio management,
project counseling and appraisal, underwriting of shares and
debentures, acting as banker for refund orders, handling
interest and dividend warrants etc.
a. Investment c. Modern
b. merchant d. Traditional
23. Merchant banker renders a host of services to corporate and
promotes --------------------
a. Industrial Growth c. Service Growth
b. Banks’ Growth d. structural growth

24. Since single bank can’t provide huge sum of loan, a number
of banks join together and form a ----------.
a. Union c. Syndicate
b. group d. All
25. Loan Syndication also enables the members of the syndicate
to share the credit ------------ associated with a particular loan
among them.
a. Risk c. Peril
b. Hazard d. Uncertainty
26. ________________ is an active member in the B S F.
a. Tarawani wala c. Motilal oswal
b. Share Khan d. India
27. A ________is an independent broker who deals in
securities on his own behalf.
a) Jobber c) Arbitrager
b) b) Tarwani wala d) Speculator
28. No broker is allowed to under write more than -------- of
public issues.
a. 7% c. 5%
b. 12% d) 3%
29. _____________________ for brokers and sub brokers
is made mandatory.
a.Registration c. Both
d. None
b. Listing
30. __________________ is a well diversified 50 stock index
accounting for 25 sectors.
a. S & P CNX Nifty c. BT 500
d. none
b. Sensex
31. ________________________ is a number that helps
measure the levels of the market.
a. Stock Index b. Portfolio
 c. Market return d. All

32. _________________ Committee was appointed to evaluate

the Introduction of Derivative.
a. Dr L C Gupta c. R L Gupta
b. Narsimham
d. None
committee
33. ___________ Provide for the delivery of the contracted
Assets.
a. Futures c. Options
b. Forwards d. Swaps
34. Short Selling is an act of _______________without owning
them.
a. selling shares c. Trading
b. Purchasing shares d. Buying back

35. Rolling Settlement starts with __________

a. S E B I c. Ministry of Finance
b. R B I
d. None
36. _____________________ should be maintained by member
brokers of all stock exchanges.
a. A Minimum c. 5 crores
deposit d. 10 crore
b. No Fees

37. ___________________________ had started its own

price index.
a. The Bombay Stock c. O.T.C.E.I
Exchange
b. National Stock d. Regional Stock
Exchange Exchange
38. ____________is a contract which gives the right but
not the obligation to buy or sell a security.
a. Option c. Future
b. Forward d. SWAP

39. ______________contract is an agreement to exchange an

asset for cash at a future date.
a. Forward c. Future
b. Option d. SWAP
40. ____________________ is a speculative sale without
having the security to deliver.
a. Short Selling c. Trading
b. Purchasing shares d. Buying back

41. __________________ is a fund raised by a financial

company by pooling the savings of the public.
a. Mutual fund c. Liability
b. Asset Management Management
d. None
42. ________________ provide a wide range of activities
such as issue management PM.
a. Merchant Bankers c. Intermediaries
d. None
b. Financial
Institutions
43. ___________________Service is useful to Investor in
formulating investment strategies.
a. Credit Rating c. Forfaiting
b. Factoring d. None
44. ____________ was prescribed a code of conduct to the
merchant bankers.

a. S E B I c. Ministry of finance
b. R B I
d. Non
45. ______________ was made mandatory for some issues.
 a. Credit Rating c) Forfaiting
b. Factoring d. None
46. _________________were set up during the last
decade.
a. New Mutual funds c. Public Issues
d. all
b. New Fund Offers

47. _______________is a company which has not

completed twelve months of Commercial Production.
a. New Company c. Prior to
b. Recent incorporation
Incorporation d. None
48. ___________________ Method of pricing securities a
becoming popular in India.
a. Book Building d. Demand for the
b. Net Asset Value share
c. Market Value
49. ________________is a method of raising funds in the market
by an existing company.
a. Rights Issue c. Bonus Issue
b. New Issue d. None
 50. The following is a kind of fee based activity of a
financial intermediary.
a. Hire Purchase
b. Leasing
c. Capital Issue management
d. Underwriting
 KEY - MULTIPLE CHOICES UNIT 1
1. engineering 22. merchant
2. Two 23. Industrial growth.
3. Structure 24. Syndicate
4. Innovators 25. risk
5. loopholes 26. Tarawani wala
6. two 27. jobber
7. Conceptual 28. 7%
8. Conceptual 29. Registration
9. Physical 30. S & P CNX Nifty
10. Physical 31. A Stock Index
11. Physical 32. Dr L C Gupta
12. Analysis 33. Futures
13. Analyst 34. Selling shares
14. Engineering 35. SEBI
15. Engineers 36. A Minimum
16. Innovation deposit
17. decompose 37. The Bombay Stock
18. Engineer Exchange
19. Secure 38. Option
20. money 39. forward
21. Merchant 40. Short Selling
41. Mutual fund 47. New Company
42. Merchant Bankers 48. Book Building
43. Credit Rating 49. Rights Issue
44. SEBI 50. Capital Issue
45. Credit Rating Management.
46. New Mutual funds

FILL IN THE BLANKS UNIT 1

1. Loan Syndication is otherwise referred as
-------------------------
2. ----------------- refer to fund raised by a financial service
company by pooling the savings of the public.
3. Mutual Funds is invested in a diversified portfolio with
view to spreading and ---------------------.
4. Mutual Funds provide Investment Avenue for
----------------- who can’t participate in the equities of big
companies.
5. Mutual Fund ensures low risk, steady returns, high
liquidity and better capital appreciation in -------------
6. ------------ refers to managing the process of sales ledger
by financial service company.
7. Factoring is ----------- under which financial intermediary
assumes credit risk in the collection of book debts for its
clients.
8. A factor provides credit information, collects debts,
monitors sales ledgers, and provides finance against
------------.
9. -------------- is a technique by which forfeiter (Financing
Agency) discounts an export bill and pay ready cash to the
exporter who can concentrate on the export front without
bothering about the collection of export bills.

10. --------------- is a process by which a financial company

converts its ill-liquid, non-negotiable and high value
financial assets into securities of small value which are
made tradable and transferable.
11. Securitization It is best suited for --------------------- whose
loans are always long-term in nature and their money is
locked up for a considerable period.
12. When money is locked up for long period, ---------------
would help the financial institution to raise cash against
such assets by means of issuing securities of small values
to the public.
13. ------------- is a security whose value depends on the value
of other basic variables backing the security.
14. A derivative security is basically used as ----------------
tool.
15. Derivative security is useful to cover the risks due to
---------------- by the investments manager.
16. ---------------- helps to break the risks into various
components such as credit risk, interest rates risk,
exchange rates risk and so on.
17. In India some forms of derivatives are in operation namely
---------- in forex market
18. ------------- is an innovative funding mechanism for the
import of goods and services on deferred payment terms.
19. ----------- is an arrangement of a financing institution /
bank of one country with another institution / bank / agent
to support the export of goods and services so as to enable
----------- to import on deferred payment terms.
20. LOC is backed by a guarantee furnished by ------------in
the importing country.
21. LOC helps the exporter to get ---------- immediately as
soon as the goods are shipped
22. Infrastructure Bond is a kind of ------------ issued with a
view to giving tax shelter to investors.
23. The resources raised through Infrastructure bond will be
used for promoting investment in the field of certain
-----------------.
24. Tax concessions for --------------- are available under sec.
88, sec. 54 EA and sec. 54 EB of Income Tax Act.
25. ------------- has issued for the first time such Infrastructure
Bon bonds.

26. ____________________is a market for dealing in

monetary assets of short term nature.
27. _____________________ deals in existing securities.
28. The new issue market in _________________
29. ______________ refers to Investment in different kinds
of Securities.
30. ______________ is the most common method followed
by joint stock companies.
31. _______________________ of pricing securities a
becoming popular in India.
32. The Indian companies have issued
______________________________
33. __________________ was prescribed a code of
conduct to the merchant bankers.
34. _________________ is a fund raised by a financial
company by pooling the savings of the public.
35. _________________________________ had started its
own price index.
36. The ____________________ has compiled security
indices from 1949 onwards.
37. Rolling Settlement starts with ________________
38. Short Selling is the act of ______________________
without owning them.
39. _______________________ Committee was appointed
to evaluate the Introduction of Derivative.
40. Underwriting Activity done by financial intermediary is
------------------
41. ___________________ of brokers and sub brokers is
made mandatory.
42. No broker is allowed to under write more than
__________________ .
43. A _________________ is an active member in the B S E.
44. A _______________________ is a broker who buys &
sells securities on behalf of his clients.
45. _________________________ is an employee of the
stock broker.
 46. Stock Brokers are key players in
________________________
47. _____________________ Brokers buy securities in one
Market.
48. ________________________ finances as project based
on the potentialities of a new project.
49. Term Lending institutions are ------------------ market
intermediaries
50. ____________________ Facility is used for the limited
physical market.

Multiple Choices: Key Unit 1

1. Consortium of Finance 7. An arrangement

2. Mutual Funds 8. Debts
3. Minimizing risk 9. Forfeiting
4. Small investors 10. Securitization
5. Long run 11. Housing finance
6. Factoring companies
12. Securitization 32. Global Depository
13. Derivative Security Receipts ADRS Foreign
14. Risk management Currency Bonds.
15. Price fluctuations 33. SEBI
16. Derivative Security 34. Mutual fund
17. Forwards 35. The Bombay Stock
18. Letter of Credit Exchange
19. The importers 36. RBI
20. The institution / bank 37. SEBI
21. Payment 38. Selling shares
22. Debt instrument 39. Dr L C Gupta
23. Infrastructure industries 40. Fund based
24. Infrastructure Bond activity.
25. HUDCO 41. Registration
26. Money Market 42. 5% of public
27. Secondary Market issues.
28. New Securities. 43. Tarawani wala
29. Portfolio 44. Commission
30. Public Issue broker
31. Book Building 45. Authorized Clerk
Method 46. Secondary Market.
47. Arbitragers
48. Venture Capitalist
 49. Capital Market 50. Odd Lot Market

Multiple Choice Questions - UNIT 2

1. A Financial Institution is a_______________
a. Company c. non profitable
b. co-operative society organization
d. none
2. The seller who is also called as____________ of a bill of exchange
a. Holder c. drawer
b. maker
d. Drawee
3. The holder of B/E can _________________ the B/E up to the date
of maturity or before the date of maturity.
a. Hold or discount c. deliver
d. Issue
b. transfer
4. Demand bill is the bill which is payable immediately
at_____________________.
a. Sight or on b. On demand
presentment
c. due course
 d. none
5. _______________is also called as time bill.
a. Usance bill c. due bill
d. draft
b. tenure bill
6. merchant bank is a _______
a. financial intermediary c. bank
d. all
b. financial institution

7. The service offered an undertaken by merchant banker is known

as
a. merchant banking c. undertaking

b. Investment banking d. none

8. The functions of merchant’s bankers are governed by

a. SEBI c. both
b. RBI d. none
9. Merchant banker is engaged in the business of
a. issue management c. Allotment

b. Subscriptions d. All

10. It is mandatory to hold a certificate for a merchant banker

granted by
 a. SEBI c. ministry of finance
b. RBI
d. none
11. Merchant banker cannot carry
a. fund based activity c. leasing
d. all
b. deposits

12. SEBI means

a. securities board c. securities & exchange
b. Securities & exchange board of
board India
d. all
13. SEBI is nodal agency to regulate
a. capital market c. stock market
d. none
b. Secondary market

14. SEBI is concerned with

a. Protecting investors c. promote fair dealings
d. all
b. protecting their rights

15. The most important information available to investor is

a. Offered document c. advertisement
d. all
b. research reports
16. Demat means
 a. material c. De Materialization

b. D material d. all
17. Number of stock exchanges in India
a. 26 c. 4
d. 25
b. 3
18. ___ is an opinion on future ability & legal obligation of the issuer

a. credit rating c. credit worthiness

b. credit measurement d. none

19. First agency to set-up for credit rating in India is

a. CRISIL c. CARE

b. ICRA d. none

20. Credit rating deals with ___ risk evaluation

a. business risk c. Both
d. none
b. Financial risk
21. The benefits of credit rating are
 a. Important c. Intermediary
information to
d. all
investors’
b. issuer credit worthiness
22. According to CRISIL highest safety is
a. A A A c. A
d. A+
b. A A
23. According to ICRA highest safety bond is
a. L A A A c. L A
d. L A +
b. L A A
24. Book building is a process where in issue price of a security
is determine by
a. Demand c. Demand & supply

b. Supply d. none
25. Book runner means
a. Merchant Banker c. issuer
d. none
b. Investor
26. ------------------- can be defined as “An organization that acts as an
intermediary between the issuers and the ultimate purchasers of
securities in the primary security market.”
a. merchant banker b. Investment Banker
 c. Modern Banker d. Non

27. A merchant banker is an institution that helps companies to

------------ capital.
a. Raise c. Issue
b. Distribute d. None

28. Merchant bank is an organization that ------------------- corporate

securities, provides advisory services to its clients.
a. Undertaken c. Unify
b. Underwrites d. None

29. The Activity of merchant bankers which facilitate issue process is

termed as -----------
a. merchant banking c. Modern Banking

b. Investment Banking d. Mortgage Banking

30. A merchant banking company has been exempted from the
provisions of Section 45-IA , Section 45-IB and 45-IC of the
---------------- Act, 1934.
 a. RBI c. IT
b. SEBI d. a& b
31. It is registered with the Securities and Exchange Board of India as
a Merchant Banker under Section ----------- of the Securities and
Exchange Board of India Act, 1992.
a. 10 c. 12
b. 11 d. 13
32. ------------ is carrying on the business in accordance with the
Securities and Exchange Board of India Merchant Banking (Rules)
1992.
a. Commercial Banking c. Merchant Banking

b. Investment Banking d. b&c

33. Merchant Bank does not accept or hold --------- deposits as defined
in paragraph 2(1)(xii) of the Notification No. DFC 118/DG(SPT)-
98 dated January 31, 1998.
a. Private c. Recurring
b. Public d. Fixed
34. Registration with SEBI is -------------- to carry out the business of
merchant banking in India.
a. Optional c. Not required
b. Mandatory d. Up to RBI
 35. An applicant should comply with ----------------- of the following
to be merchant banker:
i. The applicant should be a body corporate
ii. The applicant should not carry on any business other than
those connected with the securities market
iii. The applicant must have at least two employees with prior
experience in merchant banking
iv. Any associate company, group company, subsidiary or
interconnected company of the applicant should have been a
registered merchant banker

a. i , ii &iv i, ii & iii

b. i & ii all
36. The applicant , who wants to be merchant banker, should have a

minimum net worth of Rs.----------- crores

a. 5 c. 7
b. 6 d. 8
37. Bid Bond Guarantee, Advance Payment Guarantee , Performance
Guarantee Down, Payment Guarantee , Retention Money
Guarantee , Maintenance Guarantee, Overseas Borrowing
Guarantee are ------------ activities of merchant bank.
a. General c. Fund
b. Special d. Non-fund
38. Pre-shipment credit both in Indian rupees and in foreign currency
to extend financial assistance for procuring/manufacturing/
 processing/ packing/ shipping goods meant for export is ------------
Activity.
a. General c. Fund
b. Special d. Non-fund

39. When a project export is on deferred Credit terms, we meet the

financial requirement of our exporter by Rupee/ Foreign currency
-------------------
a. Suppliers Credit c. Supplier’s Credit
b. Buyer’s Credit d. Exporter’s credit

40. Merchant Bank also participates in grant of credit to foreign buyers

under the ------------- Scheme’ of Exim Bank.
a. Suppliers Credit c. Supplier’s Credit
b. Buyer’s Credit d. Exporter’s credit
41. The East India Trading Company secured a Royal Warrant from
England, providing the firm with official rights to ----------- trading
activities in India.
a. Bureaucratic c. Systematic
b. Lucrative d. a&b
 42. -----------------Trading Company involved in financing,
a. Hudson Bay c. East India
negotiating, and implementing trade transactions in India.
b. India Trading d. All
43. The American colonies also represent the product of merchant
banking, as evidenced by the activities of the famous
-----------------.
a. East India c. Hudson Bay
b. India Trading d. All
44. Merchant Banks can ------------- the Economic Development.
a. Ruin c. Share
b. Fuel d. All
45. Merchant Banking, as the term has evolved in Europe from the
18th century to today, pertained to an individual or a banking
house whose primary function was to facilitate the ----------------- .
a. Business process c. Life
d. All
b. Trading
46. Till early --------------, there was no merchant banking in the Indian
banking system.
a. 1960 c. 1967
b. 1965 a. 1970
47. Grindlays Bank which started merchant banking services as far
back as ------- in India.
a. 1962 b. 1965
c. 1967
d. 1970
48. Citibank started merchant banking services in -------------
a. 1969 c. 1972
b. 1970 d. 1975
49. SBI started merchant banking services in ----------------.
a. 1969 c. 1972
b. 1970 d. 1975
50. The boom in the capital market in mid 1970sin India with the
introduction of FERA – ----------- encouraged other banks and
financial institutions to set up MB divisions.
a. 1969 c. 1972
b. 1970 d. 1973
 30. RBI
31. a
KEY 32. Merchant Banking
1. Company
2. Holder 33. Public
3. Hold or discount 34. Mandatory
4. Sight or on presentment
5. Usance bill 35. all
6. Financial intermediary
7. Merchant banking 36. 5
8. SEBI 37. Non-fund
9. Issue management
10. SEBI 38. fund
11. All
12. Securities & exchange 39. Exporter’s credit
board of India 40. Buyer’s Credit
13. Capital market
14. All 41. Lucrative
15. All
16. De Materialization 42. East India
17. 26
43. Hudson Bay
18. Credit
19. Crisil 44. Fuel
20. Both
21. All 45. Business process
22. AAA
23. LAAA 46. 1960
24. Demand & supply 47. 1967
25. Merchant Banker 48. b1970
26. merchant banker
27. Raise 49. 1972
28. Underwrites
29. merchant banking 50. 1973
 Fill in the Blanks

1. ________________________ play an important role in economy.

2. Economic development depends on the available
_________________________ in the economy.
3. Commercial banks provide for ___________________
4. The govt. has framed a policy of __________________
development in all regions in a country.
5. Diversification of ownership of ______________ sector banks is
permitted.
6. A _____________________ is one which is registered in the
second schedule of the R B I.
7. The banker concerned must be in ______________ of banking in
India.
8. Banks have to maintain __________________ in the form of cash,
gold, treasury bills.
9. S. L. R stands for ____________________
10. C .R. R stands for ____________________________
11. ______________________ in India are undertaken for Debt
mgmt.
12. _____________________ Management is a strategic approach of
managing the balance sheet.
13. _________________ is an important technique.
14. ___________________ primarily evaluates the effect of interest
rate changes on the market.
15. N P A means _____________________
16. The culture___________________ system of permitting
excess drawing during the processing.
17. ______________________in India is full of challenges in the era
of reforms.
18. The commercial banking in India which
enjoyed________________ position.
19. N B F C _________________________
20. N B F C Located in southern part of India commenced their
operations as _______________________
21. _____________________ is concerned with mobilizing
money from the people.
22. N O F -_______________________
23. The Government of India has taken a historical decision to private
is _________________________ banks.
24. A Financial Institution which is a ____________________
25. ___________________ for high level of NPA’s in commercial
banks.
26. Merchant Banking is a --------------- service.

27. It ---------s funds rather than providing them.

28. Originally Merchant Banking business was started in--------- and
France.
29. Later on, it came into existence in the ------------ and the U.S.A.
30. In India, it has become popular from ----------------.
31. The ------------ initiated the merchant banking activity in Indian
Capital Market in 1969.
32. It’s business forms was on the management of Public Issues and
--------------------.
33. ---------------- introduced its merchant banking division in 1970.
34. in view of the widening industrial base of the country, the
Banking commission report in -----------, stressed the need for
merchant banking in India
35. ICICI started merchant banking services in -------------
36. Besides banks and financial institutions, ------------------- also
started providing merchant banking services.
37. -------------- refers to assistance rendered by merchant banks to get
mainly term loans for projects.
38. Project counseling, capital restructuring, project management,
public issue management are covered by ------------- of merchant
bank.
39. Issue management involves marketing of -----------------.
40. --------------------- is part of pre issue management.
41. The ------------------ of merchant banker consists of collection of
application forms and statement; of amount received from bankers,
screening applications, deciding allotment letters, share certificates
and refund orders.
42. -------------- is a guarantee given by the underwriter that in the
event of under subscription the amount underwritten would be
subscribed by them.
43. Portfolio refers to investment in different kinds of securities such
as shares debentures or bonds issued by ---------------- and
securities issued by the government.
44. SEBI guidelines classified the merchant banks into ----------- based
on the nature and range of activities.
45. The ----------------- consists of merchant bankers who carry on any
activity of issue management which will inter-alia consists of
preparation of prospectus and other information relating to the
issue.
46. The ------------ consists of those authorized to act in the capacity of
co-managers/advisor, consultant and underwriter to an issue or
portfolio manager.
47. The ---------------- consists of those authorized to act as underwriter
advisor or consultant to an issue.
48. The ------------ consists of merchant bankers who act as advisor or
consultant to an issue.
49. Each merchant banker is required to furnish to the SEBI half
yearly ------------ financial results when required by it.
50. The lead merchant banker holding a certificate under category I
shall accept a minimum underwriting obligation of 5% of the total
underwriting commitment or 25 lakhs whichever is --------------.

KEY

1. Commercial banks 22. Net owned fund.

2. Savings & Investments 23. 19 Public Sector
3. trade & Commerce 24. Company
4. balanced 25. Internal Factors
5. public 26. fee-based
6. Schedule bank 27. arrange
7. business 28. Italy
8. liquid assets 29. U.K.,
9. Statutory liquidity Ratio 30. 1983-84
10. Cash Reserve Ratio. 31. Grindlays Bank
11. The open market 32. Financial Consultancy
operations 33. City Bank
12. Asset Liability 34. 1972
13. Gap analysis 35. 1974
14. Duration Method 36. Non-Banking Financial
15. Non performing Asset Companies
16. Indian Banking 37. Loan syndication
17. Commercial banking 38. corporate counseling
18. monopoly 39. corporate securities
19. Non banking finance 40. Pricing of issue
companies 41. post issue management
20. Nidhis or chit funds. 42. Underwriting
21. Investment company 43. different companies
 44. four categories 48. fourth category
45. first category 49. un-audited
46. second category 50. less
47. third category

MULTIPLE CHOICE QUESTIONS - UNIT 3

1. The ownership of the asset passes on to the___________

a. user (hier) c. Holder

b. Seller d. None
2. A lease can be evaluated as ________________ Decision.

a. Investment c. Selling
b. Purchasing d. All
3. B E L R ______________________

a. Break even lease rental. a. business entity leverage ratio

c. none of the above
b. Break Even Lease
Receipts
4. _________________is a type of finance lease.

a. Direct Lease c. finance lease

b. indirect lease d. lease rental
5. A manufacturer can also act as a _________________

a. lessor c. Hire vendor

b. lessee d. None
6. The loan is secured by the assets and the ______________

a. Lease rentals c. Leased Asset

b. Lease Payments d. None
7. The break even lease rental of the lessor sets the __________

a. Lower limit. c. break even limit

b. higher limit d. none of the above
8. ______________is a made of financing the price of goods to be
sold on a future date.

a. Hire purchase c. investing

b. leased agreement d. Purchasing
9. A hire purchase agreement is defined as _________kind of
transaction.

a. peculiar c. specialized
b. distinct d. An absolute.
10. The Depreciation on the asset is charged in the books of the
________

a. lessor. c. hire vendor

b. lessee d. Hire seller.
11. The cost of maintenance of ___________is to be borne
typically.

a. hired asset c. purchased asset

b. leased asset d. none
12. Decision extension from the point of view of a hire is the cost
of___________.

a. Hire purchase. c. lease agreement

b. hire agreement d. Leased sale.

13. ________________is the hire purchase plan.

a. Net present value c. internal rate of return

b. Present Value of d. profitability index
inflows
14. ______________is not levied on hire purchase transaction.

a. Sales tax c. excise duties

b. Income tax d. import duties
15. The interstate hire purchase deals attract
___________________.

a. Central sales tax. c. excise duties

b. Income tax d. import duties
16. _____________movement of goods is not occasioned

a. Interstate c. out of the country

b. Intra State d. none
17. The hire purchase transaction can be used as a
______________device.

a. Tax planning c. Moving

b. Hiring d. none
18. ________________is a multipurpose financial institution.

a. Development bank c. State Bank

b. Andhra Bank d. None.
19. Lease finance and_______________ are generally used to
acquire capital goods.

a. hire purchase c. Hiring finance

b. Lease rentals d. Leased asset.
20. The cost of acquisition in hire purchase is relatively
________.

a. low b. high
 c. average d. nil
21. Lease financing is in variably _______ financing.

a. 100% c. 75%
b. 50 % d. 25%
22. ____________is never transferred to the user.

a. Ownership c. Documents

b. Asset d. none

23. A lease cannot include a leased asset in a________ of assets.

a. Pool c. Price
b. lease d. Deal
24. The tax expects of leasing pertain to both income tax
and____________

a. Sales tax. c. import duties

b. export duties d. none

25. The Computation of taxable income of an assesse under the

provisions of the ___________
 a. Income tax act. c. export duties
b. sales tax d. import duties
26. Leasing in the world started in 200 BC in ------------- civilization.

a. Sumerians c. Indus
b. Harappa d. All
27. The concept of financial leasing was pioneered in India during
---------------.

a. 1971 c. 1973
b. 1972 d. 1974
28. The first leasing company was setup by the ------------ group in
1973 in Madras.

a. Chidambaram c. Travancore
b. Chakkilam d. Vellore
29. The person delivering the goods is called the -----------

a. Bailor c. Vendor
b. Bailee d. Supplier
30. The person to whom they are delivered is called ---------

a. Bailor c. Vendor
b. Bailee d. Supplier
31. An equipment lease transaction is regarded as contract of
------------

a. Negotiation c. Bailment

b. Agreement d. Arrangement

32. The provisions relating to bailment in the -------- Act govern

equipment leasing agreements.

a. Indian contract c. Indian Bailment act

b. Indian Negotiation d. Indian

Act Arrangement Act
33. As per the --------------, the lessee can claim lease rentals as tax
deductible expenses.

a. Income tax c. Commercial tax

b. Sales tax d. a & b

34. The lessee rental received by the lesser is -------------.

a. Exempted b. Partially exempted

 c. Taxable d. Refundable
35. The leasslor can claim investment allowance and depreciation on
the investment made in leased assets under -----------------------
Act.

a. Income tax c. Commercial tax

b. Sales tax d. a & b

36. -------------- is a mode of financing the price of the goods to be sold
on a future date.

a. Leasing c. Forfaiting
b. Factoring
d. Hire Purchase
37. -------------------- agreement is defined as peculiar kind of
transaction in which the goods are let on hire with an option to the
hirer to purchase them

a. Leasing c. Hire Purchase

b. Factoring d. Forfaiting
38. ------------------- given on hire with an option to buy Hire Purchase

a. Bonds c. Debentures
b. Stock
d. Equipment
39. In hire purchase, depreciation and investment allowance can
be claimed by ---------

a. Bailor c. hirer
b. Bailee d. Hiree
40. In --------------, the Transfer of right of use by the owner (Lessor)
to the User (Lessee) is done for an agreed period of time.

a. Equipment Leasing c. Fixed Leasing

d. Operational Leasing
b. Rental Leasing

41. A ------------ is an agreement whereby the lessor conveys to the

lesses in return for payment or series of payments the right to use
an asset for an agreed period of time.

a. Lease c. Hire Purchase

b. Hiring
d. Forfaiting

42. A ---------------- is a lease that transfers substantially all the risks

and rewards incident ownership of an asset.

a. Financial Leasing b. Operating Leasing

 c. Equipment Leasing d. None

43. An ------------------ is a lease other than a finance lease.

a. Financial Leasing c. Equipment Leasing

b. Operating Leasing d. None

44. A ------------------- is a lease that is cancellable when the

occurrence of some remote contingency.

a. Cancellable c. financial

b. Non-cancellable d. Operational

45. The ------------------ is the non cancellable period for which the
lessee has agreed to lease the asset together with any further terms
for which the lessee has the option to continue to lease the asset.

a. Gestation period c. Lease Term

b. Assessment Period
d. Agreement period
46. It is the amount for which an asset should be exchanged or a
liability settled between knowledgeable, willing parties in an arm’s
length transaction.

a. Financial Leasing c. Equipment Leasing

b. Operating Leasing d. None

47. The period over which an asset is expected to be economically

usable by one or more users-------------

a. Operating Life c. Economic Life

b. Expected Life d. Usefullife

48. The period over which the leased asset is expected to be used by
the lessee-----------.

a. Operating Life c. Economic Life

b. Expected Life d. Usefullife

49. -------------- of a leased asset is the estimated fair value of the asset
at the end of the least term.

a. Residual value c. Economic Value

b. Expected Value
 d. None

50. The part of the residual value which is guaranteed by the lessee or
by a party on behalf of lessee----------------------.

a. Residual value c. Economic Value

b. Expected Value d. Guaranteed

residual value

Multiple Choice Questions KEY

1. User (hirer) 13. Net present value

2. Investment 14. Sales tax
3. Break even lease rental 15. central sales tax
4. Direct Lease 16. Inter state
5. Lessor 17. Tax planning
6. Lease rentals 18. Development bank
7. Lower limit 19. Hire purchase
8. Hire purchase 20. Low
9. Peculiar 21. 100%
10. Lessor. 22. Ownership
11. Hired asset 23. Pool
12. Hire purchase 24. Sales tax
25. Income tax act. 38. Equipment
26. Sumerians 39. Hirer
27. 1973 40. Rental Leasing
28. Chidambaram 41. Lease
29. Bailor. 42. Finance lease
30. Bailee 43. Operating Leasing
31. Bailment 44. Non-cancelable
32. Indian contract 45. Lease term
33. Income tax 46. Financial Leasing
34. Taxable 47. Economic life
35. IT Act 48. Useful life
36. Hire purchase 49. Residual value
37. hire purchase 50. Guaranteed residual
value

Fill in the Blanks

1) The owner of the Asset is called the ______________

2) The lessor receives the lease rentals during the
__________________ period.
3) A financial lease is a kin to ___________________loan secured
on the equipment.
4) They can take additional security such as
__________________________
5) The reasons for increased risk in financial learning are the owner
and the user ______________________________ are legally
responsible.
6) The use of equipment is obtained without ____________________
7) The lease arrangement also lets the firm avoid the risk of
_____________________
8) A lessee is deprived of the ___________________ of the asset at
the end of the lease period.
9) A lease cannot include a leased asset _____________ of asset.
10) The tax expects of leasing pertain to both
___________________ and __________________
11) B E L R ___________________________
12) A manufacturer can also act as a ______________
13) The loan is secured by the assets and the _______________
14) _________________ is a made of financing the price of goods to
be sold on a future date.
15) A hire purchase agreement is defined as _______________ kind
of transaction.
16) The cost of maintenance of hired asset is to be
________________
17) __________________ Extension from the point of view of a
hier is the cost of hire purchase.
18) __________________ is the hire purchase plan.
19) __________________ is not lived on hire purchase transaction.
20) The inter state hire purchase deals attract
________________
21) The hire purchase transaction can be used as a
__________________ device.
22) ______________________ is a multipurpose financial
institution.
23) The cost of acquisition in hire purchase is relatively
___________________
24) _________________ is never transferred to the user.
25) The first distinction between hire purchase & installment purchase
is based on the ____________________
26) Hire Purchase is a method of --------------------.
27) The ownership of the property remains with creditor and passes on
to the hirer on the payment of --------------------.
28) In -----------------, the buyer required to pay an agreed amount in
periodical installments during a given period.
29) The hire purchase agreement is made under the provisions of
-----------.
30) The rate of interest quoted on a hire purchase transaction is
always a flat rate.
31) If the installments are payable in advance , the relationship
between effective rate (i) and Flat rate (F) is given by
--------------------
32) In the books of Finance company, the hire purchase installment
receivable is shown as a current asset under the head stock on hire.
33) The finance Income (unearned Income) component of the
installment is shown as current liability under the head un-matured
finance charges
34) ---------------------- Residual value is the amount by which the
residual value of the asset exceeds its guaranteed residual value.
35) -------------- in the lease is the gross investment in the lease less
unearned finance income.
36) ----------------is the discount rate that, at the inception of the lease,
causes the aggregate present value of the minimum lease payments
under a finance lease from the standpoint of the lessor.
37) ------------- is that portion of the lease payments that is not fixed in
amount but is based on a factor other than the passage of time
38) An operating lease is also known as -------------, short-term lease or
true lease.
39) The contractual period between lessor and lessee is ------------ the
full expected economic life of equipment in operating lease.
40) -------------- Contracts are usually non cancelable.
41) ------------------ Contracts are usually cancelable either by the lessor
or by the lessee.
42) A --------------- is used for financing those assets which require
huge capital outlay.
43) Under ------------ a firm which has an asset sells it to the leasing
company and gets it back on lease.
44) Cross border lease is international leasing and is known as
-----------------------.
45) ---------------- relates to a lease transaction between a lessor and
leassee domiciled in different countries and includes exports leasing.
46) The risk of not receiving the lease rentals on schedule is known as
----------
47) The possibility of a decline in the estimated residual value of
the equipment is ------------
48) ---------------- refers to the changes in the market rate of interest
which adversely affects the cost of funds to the lessor.
49) -------------- is the reduction in the value of lease rentals in real
terms caused by anticipated inflation.
50) The changes in the governmental policies in general, and the fiscal
policy in particular, which have significant implications for the
economic viability of lease investments is known as
-------------------------.
 Fill in the Blanks
1. Commercial banks 2. Savings &
Investments
3. Trade & 17. Commercial
Commerce banking
4. Balanced 18. Monopoly
5. Public 19. Non banking
6. Schedule bank finance companies
7. business 20. Nidhis or chit
8. Liquid assets funds.
9. Statutory liquidity 21. Investment
Ratio company
10. Cash Reserve 22. Net owned
Ratio. fund.
11. The open 23. 19 Public
market operations Sector
12. Asset 24. Company
Liability 25. Internal
13. Gap analysis Factors
14. Duration 26. selling goods
Method 27. last Installment
15. Non 28. Hire purchase
performing Asset 29. Hire
16. Indian Purchase Act,
Banking 1972
30. flat rate.
31. I = (n / n- 42. A leverage
1)2F lease
32. stock on hire. 43. sale and lease
33. un-matured back
finance charges 44. transnational
34. Unguaranteed leasing
35. Net 45. Cross Border
investment Lease
36. Implicit 46. Default risk
interest 47. Residual
37. Contingent Value Risk
rent 48. Interest rate risk
38. service lease 49. Purchasing
39. less than Power Risk
40. Financial 50. Political Risk
lease
41. Operating
leasing
 MULTIPLE CHOICE QUESTIONS - UNIT 4

1. Insurance is a ------- of risks.

a. Form c. value
b. Junk d. pool
2. Insurance is a ---------.
a. Contract c. commodity
b. contrast d. community
3. The document of laying down the terms of the contract is
called ------------------
a. Insurance policy c. Insurance Product
b. Insurance claim d. a&b
4. The subject matter of insurance ------------
a. Money c. Property
b. Health d. a&b
5. Depending upon the subject matter the insurance is classified
into -------types.
a. One c. Three
b. Two d. Four
6. Life Insurance is an Insurance which considers life of
-----------------.
 a. An individual c. Machines
b. Buildings d. crop
7. -------------- covers the risk caused by fire , accident etc.,
a. Life c. Fire
b. general d. Accident
8. There is a fixed obligation in ----------------.
a. Fixed c. Semi-variable
b. Variable d. a&b
9. General Insurance does have ------------- obligation.
a. Form Fixed c. Semi-variable
d. a&b
b. Variable
10. The Interest which the insured has in the subject matter
of insurance is known as --------------.
a. Simple c. Insurable
b. Compound d. a&b

11. Life Insurance Policy is not ------------------.

a. Fixed c. Semi-variable
b. Variable d. a&b
12. General Insurance policy is considered as contract of
---------------.
a. Indemnity c. Indefinite
b. Identity d. b&c
13. Insurable Interest is measured in case of -------------
a. Life c. Fire
Insurance.
b. general d. Accident
14. Measurement of Insurance is not possible in case of
--------- Insurance.
a. Life c. Fire
b. general d. Accident
15. General Insurance policy is --------- contract.
a. Fixed c. Semi-variable
b. Variable d. Annual
16. Life Insurance is a --------- contract.
a. Fixed c. Continuous
b. Variable
d. Annual
17. The Insurance Act, --------- Provides broad frame work
for Insurance.
a. 1938 c. 1958
b. 1948 d. 1968
18. Insurance business can be done by Public Company,
------------ etc.,
a. An Individual c. Cooperative Society
b. Public Company
d. a&b
19. Any Public company or Cooperative society having
--------- of paid up capital is eligible for insurance business.
a. 100 c. 300
b. 200 d. 400
20. No body of insurance company should hold more than
-------- of stake.
a. 16 c. 36
b. 26 d. 46

21. Insurance Business after 1999 is subjected to -----------

Act.
a. IDRA c. HMDA
b. IRDA d. HYMA
22. Life Business means the business of effecting contracts
of insurance upon --------
a. Living Beings Life c. Buildings Life
d. a&b
b. b. Human
23. -----------Insurance is carried on single or in
combination of different things.
a. Life c. Fire
b. b. general d. Accident
24. -------- refers to a situation where there is the
possibility of loss.
a. Threat c. Turmoil
b. b. Risk d. a&c
25. ------------ is a condition in which there is a possibility
of an adverse deviation from desired outcome that is
expected.
a. Threat c. Risk
b. b. Turmoil d. a&c
26. An event or occurrence which is unforeseen and
unlimited is called as_________
a. Accident. c. Indemnity
b. Incident d. None

27. The part of an insurance premium paid by the insurer to

an agent or broker for his services in procuring and servicing
the insurance is called as_________________.
a. Commission c. Charges
d. premium.
b. Brokerage
28. ________________is given to the policy holder to pay
the premium amount after completion of maturity date.
a. Grace days c. further days
d. none
b. additional days
29. The printed form which serves as the contract between
an insurer and an insured is ________________
a. Insurance policy c. a contract
b. an agreement d. none.

30. In insurance the chance of injury, damage or loss is

referred as ____________.
a. Risk c. accident
b. danger d. none.
31. Insurance sector in India is one of the booming sectors of the
economy and is growing at the rate of _______________ per
cent annum.
a.15-20 % . c.30%
b.20% d.40%
32. Together with banking services, it contributes to about
____________ to the country's GDP.
a.7 % c.9%
b.8% d.2%
33. Insurance is a federal subject in India and Insurance industry
in India is governed by Insurance Act, ______________
a. 1938, c. 1958
b. 1948 d. 1968
34. The origin of life insurance in India can be traced back
to 1818 with the establishment of the
_________________Company in Calcutta.
a. Oriental Life b. LIC
Insurance c. GIC
35. The Bombay Mutual Life Insurance Society that
started its business in 1870 was the first company to charge
same premium for both _______________and non-Indian
lives.
a. Indian c. non- Indian
b. foreign
d. none
36. In 1912, insurance regulation formally began with the
passing of Life Insurance Companies Act and the
_______________Act.
a. PF c. Gratuity
b. ESI
 d. none
37. In 1938, the first comprehensive legislation regarding
insurance was introduced with the passing of Insurance Act
of 1938 that provided strict State ________________over
insurance business.
a. Control c. reform
b. liberal
d. all
38. In 1956, Government of India brought together
___________ Indian and foreign insurers and provident
societies under one nationalized monopoly
a. 245 c. 255
b. 240 d. 260
39. In 1993, the first step towards insurance sector reforms
was initiated with the formation of __________Committee
a. Malhotra c. Vivekan
b. Sundaram d. Narasimham

40. The committee was formed to evaluate the Indian

insurance industry and recommend its
________________direction
a. Future c. Present
b. Past
d. None
41. _______________Committee also proposed setting up
an independent regulatory body.
a. Malhotra c. vivekan
b. sundaram d. Narasimham
42. Insurance sector in India was liberalized in March
2000 with the passage of the __________________________
a.IRDA c. RBI
b. SEBI d. none

43. There is a 26 percent equity cap for foreign partners in

an insurance company
a.26 % c.20%
b.25% d.15%
44. The opening up of the ________________sector has
led to rapid growth of the sector.
a. insurance c. Service
b. Banking d. industry
45. Presently, there are 16 life insurance companies in the
market.
a. 15 c. 20
b. 16 d. nil
46. Presently, there are 15 non-life insurance companies
in the market.
 a. 15 c. 20
b. 16 d. nil
47. The potential for growth of insurance industry in India
is immense as nearly _______ per cent of Indian population.
a. 80 c. 60
b. 70 d. 50
48. ------------ should be given that LIC should pay interest
on delays in payments beyond 30 days.

a. Customer service c. Banking service

b. Govt. service d. none
49. Committee proposed that Insurance companies must be
encouraged to set up ________________ plans.
a. unit linked pension
b. Unit linked c. Unit linked
investment plan
insurance
d. none
50. To Improve the Insurance Industry
_______________of operations and updating of technology
to be carried out in the insurance industry.
a. Computerization c. Liberalization
b. modernization d. All of the above
 MULTIPLE CHOICE KEY: UNIT 4
1. Pool 3. Insurance Policy
2. Contract. 4. property
5. two 27. commission
6. An individual 28. Grace days
7. General insurance 29. insurance policy
8. Life Insurance 30. Risk
9. Variable 31. 15-20 per cent
10. Insurable interest annum
11. contract indemnity 32. 7 per cent
12. Indemnity. 33. 1938
13. General 34. Oriental Life
14. Life Insurance
15. Annual 35. Indian
16. Continuous 36. PF
17. 1938 37. Control
18. Cooperative 38. 245
society 39. Malhotra
19. 100 Crores 40. Future
20. 26 41. Malhotra
21. IRDA 42. IRDA
22. Human life. 43. 26 %
23. General 44. insurance
24. Risk 45. 16
25. Risk 46. 15
26. Accident 47. 80
48. Customer service 50. Computerization
49. unit linked pension

FILL IN THE BLANKS

1. ----------- is a condition where the outcome of an event is
uncertain and there are two possible outcomes for a given
situation.
2. Uncertainty is a situation where the --------- is not certain
or unknown.
3. -------------- refers to a state of mind characterized by
doubt, based on the lack of knowledge about what will and
what will not happen in future.
4. Loss means being ------------- previously possessed.
5. Loss in accounting sense is that portion of ---------- for
which no compensating value has been received.
6. A -------- refers to the cause of loss or the contingency that
may cause loss.
7. --------- is a condition that increase the severity of loss or
the conditions effecting perils.
8. Hazards are of ---------- types.
9. A tangible / physical hazard consists of those physical
properties that increase the chance of loss from the various
-----------.
10. Moral hazard is --------------------.
11. The risks which can be measurable is known as
-------------------.
12. Tension or loss of piece is called ----------------------.
13. ---------------- are those resulting from changes in the
economy or environment.
14. Inflation, income and output levels, technological
changes are -----------------.
15. -------------- are a situation where there is a possibility
of loss or not loss.
16. The possibility of loss in a business or unemployment
after undergoing a professional qualification, loss due to
act of others is ---------------.
17. Speculative risks are not -----------------.
18. ------------ are those where there is possibility of gain as
well as loss.
19. ------------- are a situation where there is a possibility of
loss or no loss.
20. Pure risks are ------------------.
21. Personal risks, liability risks and property risks are
----------------.
22. Premature death, old age death, sickness, disability and
unemployment are ------------.
23. --------------- are arising out of intentional or
unintentional injury to the persons and damages to their
property through negligence.
24. ---------------- implies that the losses arising due to a
risk exposure shall be retained or assumed by the party or
the organization.
25. --------------- is one of the forms of planned retention by
which the part or full of the exposure arising due to a risk
factor is retained by the firms.
26. Life and general insurance companies are
_______________ financial intermediaries.
27. Life insurance companies provide ________________ to
the investors.
28. There has been life insurance business in India since
________________
29. Till 1956 the insurance business was
_______________and ______________________
30. All life insurance companies were nationalized in the
year ______________
31. At the time of nationalization are single
_____________________ was set up which is LIC.
32. As the insurance companies have
_______________________ there won’t be a problem of
liquidities.
33. Life policies of any type can be either
___________________ or________________
34. The sum paid out on ______________ or at
______________ is the assured of the policies in case of
life polices without profits.
35. The _____________ out of extra earnings from various
investments are added to the assured sum periodically in
case of life policies with profits.
36. Life policy is a ____________ to a future payment of
either a lump sum or a stream of income.
37. The value of the policy is the _______________ of a
lump sum or a future stream of income less the value of
future premiums.
38. Life insurance policies attract investors as they
_______________
39. LIC offers various schemes, policies and plans to the
__________________
40. A life fund is in __________________ if valuation of
fund is _______________them the present value of future
liabilities.
41. ---------------- means an excess of future income over
future out goings.
42. If the Surplus is distributed in the form of addition to
the value of policy, it is known as
_____________________
43. Means the surplus which arises when the value of the
fund is balanced.
44. The significant feature of LIC is the share of
______________in its total business.
45. The payment of life insurance amount to the insurer at
the time of _______ or _______which ever is earlier
46. Insurance is classified in two types they
are________________ and _________.
47. The payment made by the insured to the insurer is
called as __________.
48. The payment made by the insurer to the insured is
called as______________.
49. Fire insurance, Marine insurance, loss of profit policy
comes under the head ___________________.
 50. Insurance made to the life of a person is called
as_______________.

FILL UP THE BLANKS KEY UNIT 4

1. Risk 6. Peril
2. Outcome 7. Hazard
3. Uncertainty 8. Two
4. Without something 9. Perils
5. Expired cost 10. Intangible hazard
11. Quantifiable risks 32. Long term
12. Non-quantifiable liabilities
risks 33. “With profits” or
13. Dynamic risks “with out profits”.
14. Dynamic risks 34. Maturity or death
15. Static risks 35. Bonuses
16. Static risks 36. Claim
17. Measurable 37. Present value
18. Speculative risks 38. Save taxes.
19. Pure risks 39. Investors.
20. Insurable 40. Surplus ; greatest
21. pure risks 41. Revenue Surplus
22. personal risks 42. Reversionary
23. Liability risks bonus.
24. Risks Retention 43. Capital Surplus
25. Self Insurance 44. Rural areas
26. Non Banking 45. Death or maturity.
27. Protection 46. Life insurance and
28. 1818. general insurance.
29. Mixed and 47. Premium
decentralized. 48. Claim
30. 1956 49. General insurance
31. Monolithic org 50. Life insurance
 Multiple Choice questions
1. An agreement in which receivables are sold by a firm to the
financial intermediary is known as __________________
a) Factoring c) Bills payables
b) Bills receivables d) Bills discounting

2. The main function of factoring is the realization of

____________
a)Credit sales c) Both
d) None
b) Cash sales
3. The two parties in the contract are _____________
a) Two buyers c) Buyer & seller
b) Two sellers d) none
4. ____________is a document between buyer and seller which
is known as Memorandum of Understanding.
a) Letter of exchange b) Letter of lading c) Bills
discounting d) Bills Receivable
5. There are __________ types of factoring services,
a) 2 c) 4
b) 3 d) None
6. Bills discounting is always with ______________

7. The discounted bills may be _______________several times.

a) Sold c) Rediscounted
b) Purchased d) None

8. _________________offers a very flexible way of generation

against the receivables.
9. The Non – Recourse factoring is also known
as____________
a) Full factoring c) Non- factoring
b) Partial factoring d) All

10. Frame work of credit rating in India

a) Registration d) Action in case of
b) Restriction of the default.
ratio of security e) All of the above
c) Procedure for
inspection
11. Advantages of credit rating
a) Independent b) Low cost
evaluation information
c) Investor protection
 d) All of the above
12. The extensive compilation & analysis of data for rating
business is also used to provide information services
to_______________ clients.
a) Corporate c) Financial
b) Individuals institutions
d) None
13. Most of the firms treat account receivable as a
marketing tool to promote sales & __________
a) Profit c) Demand
b) Cost d) None
14. The Bills Receivable constitute a significant portion of
_______
a) Working Capital c) Current liabilities

b) Current assets d) All

15. The receivables represent ___ allowed to customer
a) Credit c) Cost
b) Sales d) Profit
16. ___ is important while formulating credit policy.
a) Receivables c) Assets management
management
d) None
b) Credit management
17. Following are the benefits of receivables management.
 a) Increasing sales c) Extra profit
b) Increasing profit
d) All
18. Receivables management has the following steps.
a) Credit policy c) Credit control
b) Credit evaluation d) All

19. Factoring means converting sales invoices into _____

a) Cash c) Payables
b) Receivables d) None

20. ____ is nothing but a substitute of a in-house

management of receivables
a) B/R c) Factoring
b) B/P d) All
21. Forfeiting means __ the right to future payments
through discounting future cash flows.
a) Forfeiting c) Compounding
b) Discounting d) All
22. A factor firm requires an approval from ___
a) RBI c) ministry of finance
b) SEBI d) Indian government
23. The factor purchases client’s ____________
a) Debtors c) Sales
b) Creditors d) None
24. The benefits of factoring are
a) Better cash flows c) Better
b) Better assets administration
management d) All
25. The cost of factoring are
a) Fees c) Non monetary cost
b) Interest cost d) all
26. Bill discounting is done always with -----------.
a) Resource c) Remarks
b) Recourse d) a & b
27. ------------- can be either with or without recourse
a) Factoring c) Forfeiting
b) Discounting d) a & c

28. In -------------------- drawer undertakes the

responsibility of collecting the bills and remitting the
proceeds to financing agency,
a) Factoring b) discounting
 c) Forfeiting d) a & c
29. Whereas a --------- usually undertakes to collect the
bills of the client
a) Factor c) Forfeiter
b) Drawer d) a & c
30. Bill discounting facility implies only ------------- of
finance
a) Factor c) Profit
b) Loss d) Provision
31. Discounted bills may be rediscounted ------------- before
they mature for payment.
a) Once c) Thrice
b) Twice d) Several Times
32. Debts purchased for factoring cannot be rediscounted,
they can be -------------
a) Refined c) Refinanced
b) Forfeited d) a & c
33. Factoring implies the provision of ---------- finance
against several unpaid trade generated invoices in batches.
a) Short c) Refinance
b) Bulk d) a & b
34. Bill financing is -------------- transaction-oriented
activity
 a) Individual c) Multiple
b) Double d) None
35. Factoring is an -------------- mode of financing
a) Off-balance c) Special Drawing
b) On-balance d) None

36. Bill discounting -------------- involve assignment of

debts as is the case with factoring
a) Does c) May
b) Does not d) None

37. There are usually --------- parties to a cross-border

factoring transactions
a) One c) Three
b) Two d) Four
38. ----------- system results in to separate but inter-linked
agreements such as between exporter and export factor or
between export factor import factor.
a) One c) Three
b) Two d) Four
39. ---------------- provides a link between export factor and
the importer and serves to solve the international barriers like
language problem, legal formalities and so on.
 a) Export factor c) Exporter
b) Import Factor d) Importer
40. --------------- also underwrites customer trade credit risks,
collects receivables and transfers funds to the export factor in
the currency of the invoice
a) Export factor c) Exporter
b) Importer d) Importer Factor
41. ---------------- informs the export factor about the export
of goods to a particular import-client domiciled in a specified
country.
a) Export factor c) Exporter
b) Import Factor d) Importer
42. --------------- writes a letter to import factor (domiciled
in the country of the importer) enquiring about the credit-
worthiness, reputation and so on of the importer.
a) Export factor c) Exporter
b) Import Factor d) Importer
43. Export receivables are factored on a ------------- basis.
a) Resource c) Non-recourse
b) Recourse d) Remarks
44. --------------- does credit checking, sales ledgering and
collection to the import factor
a) Exporter c) Export factor
b) Importer d) Import Factor
45. Import factor collects the ------------ from the importer
and effects payments to the export factor on
assignment/maturity/collection as per the terms of
assignment in the currency of the invoice
a) Bills c) Statement
b) Order d) Payment
46. The export factor makes payment to the exporter upon
--------------------- depending upon the factoring agreement
between them
a) Assignment c) Collection
b) Maturity d) Either or
47. Forfeiting is a form of financing of --------------------
pertaining to international trade.
a) Receivables c) Assets
b) Payables d) a & b
48. -------------- denotes the purchase of trade
bills/promissory notes by a bank/financial institution without
recourse to the seller.
 a) Factoring c) Forfeiting
b) Discounting d) a & c

49. In pursuance of a commercial contract between an

exporter and importer, the exporter sells and delivers the
goods to the importer on a --------------- basis
a) Down Payment c) Exporter
b) Deferred d) Importer
50. Importer draws a series of ---------------- in favor of the
exporter for payment including interest charge.
a) Bill c) Promissory Notes
b) LOC
d) Either or

Multiple Choice Questions

1. Factoring 6. Recourse.
2. Credit sales 7. Rediscounted
3. Buyer & seller 8. Factoring
4. Letter of exchange 9. Full factoring
5. 2 10. All of the above
11. All of the above 32. Refinanced
12. Corporate 33. Bulk
13. Profit 34. Individual
14. Working capital 35. Off-balance
15. Credit 36. Does not
16. Receivables 37. Four
management 38. Two factors
17. All 39. Import factor
18. All 40. Import factor
19. Cash 41. Exporter
20. B/R 42. Export factor
21. Forfeiting 43. Non-recourse
22. RBI 44. Export factor
23. Debtors 45. Payment
24. All 46. Assignment or
25. All maturity or collection
26. Recourse 47. (export)
27. Factoring Receivables
28. Bill discounting 48. Forfeiting
29. Factor 49. Deferred payment
30. Provision 50. Promissory notes
31. Several times
 Fill in the Blanks - Unit 5
1. Factoring , An agreement in which receivables arising
out of sale of goods / services are sold by a firm client to the
____________
2. --------------- of credit sales is the main function of
factoring
3. The Buyer, Negotiates terms of purchasing the material
with _____________
4. The seller undertakes ________________with the
buyer in the form of letter of exchange.
5. Seller receives ______________or more payment in
advance in factoring
6. The factor maintains the client’s ____________ on
transacting a sales deal an invoice is sent by the client to the
customer.
7. The factor undertakes to collect
____________________ on behalf of the client relieving him of
the problems involved in collection.
8. The unique feature of factoring is that a factor
_____________ the book client at a price and debts are assigned
in favor of factors.
9. Assumptions of credit risk service is provided where
debts are factored ________________________
10. There are two Types of factoring:
________________and non recourse factoring
11. The name of the factor is disclosed in the invoice by the
supplier manufacturer of the goods assigning the buyer to make
payment to the factor is known as
_________________________
12. In _______________, three factors involved namely
customer (buyer) client (seller-supplier) and factor financing
intermediary are domiciled in the same country exporter (client)
importer (customer) export factor & import factor.
13. Client gives a _____________ to sell and the factor
agrees to purchase receivable subjects to terms and conditions.
14. Bill discounting is always with
_______________where as factoring can be with recourse or
without recourse
15. _____________________ Facility implies provision of
finance factors also provides other services like sales ledger
maintenance and advisory services.
16. Discounted bill may be
_______________________several times before they mature of
payment debts purchased for.
17. Factoring implies provision of ____________ against
several unpaid trade generated invoices in batches.
18. Costs associated with recourse & non recourse is
___________________ discount charge cost of long term funds
invested.
19. In ______________________, Costs associated with
the in house many alternative with the exception of bal debt
loss.
20. Bank cannot take directly the business of factoring.
Banks may invest in business of factoring with prior approval of
________________
21. A factoring ________________ should not engage in
financing of other companies or other factoring companies.
22. Factors in India are not allowed to wider funding
sources on scales available to other _______________________
23. To purchase a book debt of its client a factor needs a
_____________________ from banks in the present context
they are relevant to issue such a certificate.
24. ________________ are the B/E’s that are accompanied
by documents that confirm that a trade has taken place between
the buyer an the seller of goods
25. ._______________ are not a accompanied by any
documents that show that a trade has taken place between the
buyer & the seller.
26. A ------------ assesses the credit worthiness of an
individual, corporation, or even a country.
27. Credit ratings are calculated from ------- and current
assets and liabilities.
28. A credit rating tells a lender or investor the probability
of the subject being able to ------------.
29. A poor credit rating indicates ------------ of defaulting
on a loan, and thus leads to high interest rates.
30. Credit Rating is based upon the history of
--------------------, as well as the availability of assets and extent
of liabilities.
31. -------- is important since individuals and corporations
with poor credit will have difficulty finding financing, and will
most likely have to pay more due to the risk of default.
32. Credit rating is an assessment of the ---------------- by an
independent agency, to pay interest and repay principal as per
the terms of issue of debt.
33. The ratings are expressed in -------- which can be easily
comprehended by the lay investors.
34. Credit rating, as exists in India, is done for a specific
----------------and not for a company as a whole.
35. A ---------- is not one time evaluation of credit risk,
which can be regarded as valid for the entire life of the security.
36. A credit rating does not create ------------ between the
agency and the users
37. Benefits of Credit Rating are Low cost information,
Quick investment decision, Independent investment decision
and ----------------
38. CRISIL Stands for --------------------
39. ICRAI Stands for ---------------------------
40. CARE stands for ----------------------------------
41. DCRI stands for --------------------
42. The first credit agency floated on ---------------- in India.
43. First credit agency was jointly started by ICICI and UTI
with an equity capital of ---------------
44. ----------- is India's leading rating agency, and is the
fourth largest in the world.

45. CRISIL is a full ---------------------- that offers a

comprehensive range of rating services
46. CRISIL Ratings provides the most reliable ------------
by combining its understanding of risk and the science of
building risk frameworks, with a contextual understanding of
business
47. The principal objective of CRISIL is to ------------- of
Indian companies.
48. Its rating guides the investors about the risk of
------------- on a particular debt instrument.
49. ICRA Limited (an Associate of Moody's Investors
Service) was incorporated in ----- as an independent and
professional company.
50. ICRA is a leading provider of ------------- and credit
rating services in India.
51. ICRA’s major shareholders include --------------- and
leading Indian financial institutions and banks. .
52. ICRA was set up by ---------------- on 16th January
1991.

53. ICRA is a public limited company with an authorized

share capital of ----------------.

54. ICRA’s initial paid up capital of ----------- crores was

subscribed by IFC, UTI, LIC, GIC SBI and others.

55. The CARE was promoted in ------------ jointly with

investment companies, banks and finance companies.
 Fill in the Blanks KEY Unit 5

1. Factor 5. 80 %
2. Realization 6. Sales ledger
3. Seller 7. Receivables
4. Memorandum of 8. Purchases
Understanding 9. Without recourse
10. Recourse 33. Code numbers
11. Disclosed factor 34. Security
12. International 35. Debt rating
factoring 36. Fiduciary
13. Undertaking relationship
14. Recourse 37. Investor protection
15. Bill discounting 38. Credit Rating
16. Rediscounted Information Services Ltd
17. Bulk financing 39. Investment
18. Factoring Information and Credit
commission Rating Agency of India
19. Recourse factoring 40. CARE
20. RBI 41. Duff Phelps Credit
21. Subsidiary/ joint Rating Pvt. Ltd. (DCR
venture factoring company India)
22. Finance companies 42. January 1, 1988
23. Disclaimer 43. 4 crores.
certificate 44. CRISIL
24. Documentary bill 45. Service rating
25. Clean bills agency
26. Credit rating 46. Opinions on risk
27. Financial history 47. Rate the debt
28. Pay back a loan obligations
29. High risk 48. Timely payment of
30. Borrowing and interest and principal
repayment 49. 1991
31. Credit 50. Investment
32. Capacity of the information
issuer of debt security
51. Moody's Investors 53. 10 crores
Service 54. Rs. 3.50
52. Industrial Finance 55. 1993
Corporation of India
 Unit – 1 VSQS

1. Financial Services
2. Fund based Activities
3. Non Fund based Activities
4. Consortium of Finance
5. Future
6. Forwards
7. Options
8. Put option
9. Call option
10. Dual Option
11. Swaps
12. Infrastructure Bond
13. Financial Analysis
14. Financial Engineering
15. Non Banking Financial Companies
16. Stags
17. Lame Ducks
18. Wolves
19. Guilt Edge Securities
20. OTC

Unit 2 VSQS
1. Merchant Bank
2. Commercial Bank
3. Corporate Counseling
4. Project Counseling
5. Loan Syndication
6. Issue Management
7. Pre-Issue management
8. Post Issue management
9. Underwriting
10. Portfolio Management
11. Adviser to the Issue
12. Lead Manager
13. Disinvestment
14. SEBI
15. Debt Related Finance
16. Equity Related Finance
17. Amalgamation
18. Merger
19. Take over
20. Acquisition
21. Liquidity
Unit 3 - VSQs
1. Hire Purchase
2. Credit Sale
3. Installment Sale
4. Financial Lease
5. Operating Lease
6. Leverage Lease
7. Cross Boarder Lease
8. Sale and Lease Back
9. Bailment
10. Bailee
11. Bailor
12. Direct Lease
13. Bipartite Lease
14. Tripartite Lease
15. Single Investor Lease
16. Sub Lease
17. Lease Related Risks
18. Residual Value risk
19. Interest Rate Risk
20. Purchasing Power Risk
Unit 4 – VSQs

1. Insurance in Financial Sense

2. Dynamic Risk
3. Static Risk
4. Pure Risk
5. Speculative Risk
6. Subjective Risk
7. Objective Risk
8. Insurable Risk
9. Hazard
10. Peril
11. Loss
12. Risk Control
13. Risk Retention
14. Risk Management
15. Cost of Insurance
16. Benefits of Insurance
17. Indemnity
18. Utmost Good Faith
19. Subrogation

Unit 5 - VSQs
1. Factoring
2. Discounting
3. Full Service Factoring
4. Full Service Factoring without recourse
5. Maturity Factoring
6. Bulk Factoring
7. Invoice Factoring
8. Agency Factoring
9. International Factoring
10. Two Factor System
11. Single Factor System
12. Direct Export Factor
13. Direct Import Factor
14. Credit Rating
15. Two Objectives of Credit Rating
16. Two Limitations of Credit Rating
17. CRISIL objectives
18. IICRA
19. CARE
20. CARE Rating for Long Term Debt Instruments

Assignment Questions
 Unit 1

1. Define Financial services. Discuss the present position of the

Financial Service Sector in India.
2. What is Financial Institutions? Discuss the various Services
rendered by the Financial Institutions.
3. What is Financial Market? Discuss the constituents of it.
4. What do you mean by Financial Engineering? Discuss the
need and importance of Financial Engineering.
Unit 2
5. What is Merchant Banking? Discuss the functions of
Merchant Banker.
6. Elucidate the SEBI Guidelines on Merchant Banks.
7. Discuss the Scope and progress of Merchant Banks in India.
8. Distinguish between Merchant Banking and Commercial
Banking.

Unit 3

9. Define the Concept of Leasing. Discuss the legal, tax and

Accounting Aspects of leasing in India.
10. Discuss the following:
 a) Gross Yield based Pricing
b) IRR based Pricing
c) Break-even lease rental
11. Explain the Following:
a) Financial Lease vs. Operating Lease
b) Sale and Lease back vs. Direct Lease
c) Bipartite Lease vs. Tripartite Lease
12. What is Hire Purchase? Discuss the characteristics of it.
Discuss the legal Tax Frame work of it.

Unit 4

13. What is Insurance? What are the features of Insurance?

Define different kinds of Risks.
14. Discuss the types of Insurance. Explain the Benefits
and costs of Insurance to the society.
15. Write an essay on IRDA.
16. Give an account of recent trends in Insurance Sector in
India.
 Unit 5

17. What is Factoring? Discuss various types of Factoring.

18. Distinguish Between Factoring and Discounting.
19. Discuss about different Credit Rating Agencies and
their performance in India.
20. Discuss the following:
a) Types of Rating
b) Costs of Factoring
c) Types of Export Factoring