TEST QUESTIONS

Objective Type Questions

1. Fill in the blanks with appropriate word(s)
a) In India accounts receivables are known as ________
b) Debt owed to the firm by customers arising from sale of goods or services in the ordinary
course of business is known as_______
c) _______involvement is one of the characteristic features of receivables.
d) ____ is a formal document issued by a bank on behalf of its customers, stating the conditions
under which the bank will honor the commitments of the customer (Buyer).
e) Credit terms have three components ___ ,/ ______ and _______ .
f) _____ represents a percentage of reduction in sales or purchase price allowed for early payment
of invoices.
g) "2/10. net 60" 2 denotes_______
h) Credit evaluation procedure involves three steps viz., ____ , _____ and ____ .
i) CRISIL, ICRA, and CARE are the three prominent _________ agencies.
j) Character, Capacity, Capital, Collateral, Conditions, and ___ are the 6 'C of credit.
[Answers: (a) Sundry debtors; (b) Bills receivables; (c) Risk; (d) Letter of credit; (e) Credit
period; Cash discount and Cash discount period; (f) Cash discount; (g) Discount; (h) Obtaining
credit information, analyzing the information and making the credit decision, (i) Credit rating (j)
Case history].

B. State whether each of the following statement is true or false

a) Receivables constitute a significant potential current assets.
b) Credit period is one of the terms of credit
c) Letter of credit is one of modes of payment
d) "Net 60".means payment will be made with in 60days form the date of credit sale
e) Optimum credit policy occurs where there is a trade of between liquidity and profitability
I) Bad debt loss is are the losses of receivables management.
g) In"2/10. net 30". 10 denotes credit period
h) Credit standards, Credit period, Cash discount and Collection are the variables of credit
policy
i) Monitoring the state of receivables does not include receivables collection procedure
j) Cost is one of the 6 'C' s of credit
[Answers: (a)True, (b) True, (c)True, (d) True, (e) True, (I) True, (g) False, (h) True, (i) False,
j) False
TEST QUESTIONS
Objective Type Questions
1. Fill in the blanks with appropriate word(s)
a) Dividend refers to that portion of company's___________ that are paid out to the equity
shareholders.
b) Distribution of profits between dividends and retained earnings affects the _______of the firm.
c) Dividend policy of a firm affects both_________ and owners' wealth.
d) Investors' desire for current income is one of the advantages of________ policy.
e) Making share trading attractive is one of the reasons of _________
I) Dividend warrants must be posted within_______ days.
g) __ is the payment of additional shares of common stock to ordinary shareholders.
h) ________Promises to pay the shareholders at a future date.
i) Usual forms of paying dividend is______
j) The issue of bonus shares amounts to a corresponding increase in the _ _ of a firm.
[Answers: (a) Net earnings, (b) value, (c) Long-term finance, (d) Stable dividend, (e) Stock split, (I)
30,
(g) Stock dividend, (h) Scrip dividend, (i) Cash, j) Paid up capital.]
2. State whether each of the following statement is tru e of false
a) Dividend decision involves legal as well as financial considerations.
b) Capital impairment rule says that dividends can be paid from capital.
c) Sec 205 of the Companies Act says that dividends can be declared only from current years
profits
or from past reserves after providing depreciation.
d) Payment of dividend is prohibited when the firm is insolvent.
e) Stock dividend affects the liquidity position of the firm.
f) There is no relation between financing decisions and dividend decision.
g) Management of earnings has nothing to do with retention of profits.
h) Ploughing back of profits is the same as self-financing.
i) Bonus issue amounts to reduction in the amount of accumulated profits and reserves.
j) Reduction the number of outstanding shares is known as reverse split:
[Answers: (a)True, ('!) False,(c)True, (d)True, (e)False, (I) False, (g)False,(h)True, (i)True (j)
True.]