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MULTIPLE CHOICES UNIT 1

1. Financial ---------------- involves the design, development and the implementation of


innovative financial instruments and solutions to problems in finance ( )
1) Analysis 2) Engineering 3) Management 4) Accounting 5) None of the
above
2. Financial Engineers play ------ roles. ( )
1) One 2) Two 3) Three 4) Four 5) Five
3. The deal makers --------- a deal to serve the clients needs and them to the client. ( )
1) Form 2) Structure 3) value 4) pool 5) None of the above
4. ------------ are those who create new products and process. ( )
1) Innovators 2) Achievers 3) Managers 4) a & b 5) all the above
5. The outlaws look to exploit ----------------------. ( )
1)Loopholes 2)Achievement 3)Targets 4)Goals 5)None of the above
6.The tools used by financial engineers are broadly divided into ----------- categories. ( )
1)One 2)Two 3)Three 4)Four 5)All of the above
7.The --------------- tools involve the ideas and concepts which underlie finance as a
formal discipline. ( )
1) Subjective 2)Conceptual 3)object 4)Physical 5)None of the above
8.The ---------------- tools are valuation theory, portfolio theory, hedging, accounting
relationships and tax treatment. ( )
1)Subjective 2)Physical 3)Object 4)Conceptual 5)All of the above
9. The ------------ tools of the financial engineers include the processes which can be
pieced together to accomplish some specific purpose. ( )
1)Subject 2)Physical 3)Object 4)Concept 5)None of the above
10. The Instruments of --------------- tools are fixed income securities, equity, future,
options and swaps. ( )
1)Subject 2)Concept 3)object 4)Physical 5)All of the above
11.The Processes of ---------- tools are Securities Trading, Electronic Funds Transfer and
Shelf Registration. ( )
1)Subject 2)Physical 3)Object 4)Concept 5)None of the above
12. ------------ is defined as a process or method of studying the nature of something in
order to determine its essential features and relationships. ( )
1) Analysis 2) Description 3) Engineering 4) a & c 5) All of the above
13. A Financial ------------- is engaged in the practice of financial analysis. ( )
1) Analyst 2) Engineer 3) Manager 4) Auditor 5) None of the above
14. Financial ----------- is an application of investment technology in an effort to solve
financial problem. ( )
1) Analysis 2) Engineering 3) Management 4) Accounting
5) All of the above
15. Financial ----------- are employed by Investment Banks, Commercial Banks and
various financial intermediaries. ( )
1) Analysts 2) Engineers 3) Managers 4) Auditors
5) None of the above
16. Financial Engineers are responsible for financial -----------------.( )
1) Construction 2) Settlement 3) Innovation 4) Accounting
5) All of the above
17. Financial Analysts ----------------- the structures in order to understand them. ( )
1) Decompose 2) Restructure 3) demolish 4)b & c
5)None of the above
18. Financial Engineer uses his knowledge of the relevant theory, instruments and
processes together in finding out the problem and solution. ( )
1) Analyst 2) CKO 3) Manager 4) Auditor 5) All of the above
19. The basic need for financial engineering is to ----------- the funds necessary for the
operation of large scale business. ( )
1) Distribute 2)protect 3)Secure 4)Finance 5)None of the above
20. Financial Engineers are involved in corporate finance, trading Investment and
-------------- management. ( )
1)Money 2)Account 3)property 4)Instrument 5)None of the above
21. ------------- Banker is financial intermediaries who helps to transfer capital from those
who possess it to those need it. ( )
1) Investment 2)Traditional 3)Modern 4)Merchant 5)All of the above
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. ( )
1) Investment 2) merchant 3) Modern 4) Traditional 5)None of the above
23.Merchant banker renders a host of services to corporate and promotes -------------- ( )
1) Industrial Growth 2)Banks Growth 3)Service Growth
4) structural growth 5) All of the above
24. Since single bank cant provide huge sum of loan, a number of banks join together
and form a ----------.( )
1) Union 2) group 3) Syndicate 4) All 5) None of the above

25. Loan Syndication also enables the members of the syndicate to share the credit
------------ associated with a particular loan among them. ( )
1) Risk 2) Hazard 3) Peril 4) Uncertainty 5) All of the above
26. ________________ is an active member in the B S F. ( )
1) Tarawani wala 2) Share Khan 3) Motilal oswal 4) India
5) None of the above
27. A _______is an independent broker who deals in securities on his own behalf. ( )
1) Jobber 2) Tarwani wala 3)Arbitrager 4)Speculator 5)All of the above
28. No broker is allowed to under write more than -------- of public issues. ( )
1) 7% 2)12% 3) 5% 4) 3% 5) None of the above
29.__________________ for brokers and sub brokers is made mandatory. ( )
1) Registration 2) Listing 3)Both 4)Clearing and settlement
5) None
30. ____________ is a well diversified 50 stock index accounting for 25 sectors. ( )
1) S & P CNX Nifty 2) Sensex 3) BT 500 4)All of the above 5)None
31. ________ is a number that helps measure the levels of the market. ( )
1) Stock Index 2) Portfolio 3)Market return 4)All 5)None of the above
32. _____Committee was appointed to evaluate the Introduction of Derivative. ( )
1) Dr L C Gupta 2) Narsimham committee 3) R L Gupta 4) All of the above
5) None
33. ___________ Provide for the delivery of the contracted Assets. ( )
1) Futures 2) Forwards 3)Options 4)Swaps 5)None of the above
34. Short Selling is an act of _______________without owning them.
1) selling shares 2) Purchasing shares 3) Trading 4)Buying back
5) None of the above
35. Rolling Settlement starts with __________
1) S E B I 2)R B I 3) Ministry of Finance 4)All of the above
5)None of the above
36. ________ should be maintained by member brokers of all stock exchanges.
1) A Minimum deposit 2) No Fees 3) 5 crores 4) 10 crores
5) All of the above
37. ________ had started its own price index.
1)The Bombay Stock Exchange 2) National Stock Exchange 3) O.T.C.E.I
4) Regional Stock Exchange 5) None of the above
38._____is a contract which gives the right but not the obligation to buy or sell a security.
1) Option 2)Forward 3) Future 4)SWAP 5)All of the above
39. ________contract is an agreement to exchange an asset for cash at a future date.
1) Forward 2)Option 3)Future 4) SWAP 5) None of the above
40. __________ is a speculative sale without having the security to deliver.
1) Short Selling 2) Purchasing shares 3)Trading 4) Buying back
5) All of the above
41. _____ is a fund raised by a financial company by pooling the savings of the public.
1) Mutual fund 2) Asset Management 3)Liability Management 4)None
5) Bill discounting
42. ____________ provide a wide range of activities such as issue management PM.
1) Merchant Bankers 2) Financial Institutions 3)Intermediaries
4) All of the above 5) None of the above
43. ___________Service is useful to Investor in formulating investment strategies.
1) Credit Rating 2) Factoring 3) Forfeiting 4)All of the above
5) None of the above
44. ____________ was prescribed a code of conduct to the merchant bankers.
1) S E B I 2)R B I 3)Ministry of finance 4)All of the above
5) None of the above
45. _____________ was made mandatory for some issues.
1) Credit Rating 2) Factoring 3)Forfeiting 4)All of the above
5) None of the above
46. ___________were set up during the last decade.
1) New Mutual funds 2) New Fund Offers 3) Public Issues
4) All of the above 5) None of the above
47. ___is a company which has not completed twelve months of Commercial Production.
1) New Company 2) Recent Incorporation 3)Prior to incorporation
4) All of the above 5) None of the above
48. ________________ Method of pricing securities a becoming popular in India
1) Book Building 2) Net Asset Value 3) Market Value 4)Demand for the share
5) All of the above
49. _____________is a method of raising funds in the market by an existing company.
1) Rights Issue 2) New Issue 3) Bonus Issue 4)All of the above
5) None of the above
50. The following is a kind of fee based activity of a financial intermediary.
1) Hire Purchase 2) Leasing 3) Capital Issue management
4)Underwriting 5) None of the above

KEY - MULTIPLE CHOICES UNIT 1


1. engineering 2. Two
3. Structure 27. jobber
4. Innovators 28. 7%
5. loopholes 29. Registration
6. two 30. S & P CNX Nifty
7. Conceptual 31. A Stock Index
8. Conceptual 32. Dr L C Gupta
9. Physical 33. Futures
10. Physical 34. Selling shares
11. Physical 35. S E B I
12. Analysis 36. A Minimum deposit
13. Analyst 37. The Bombay Stock Exchange
14. Engineering 38. Option
15. Engineers 39. forward
16. Innovation 40. Short Selling
17. decompose 41. Mutual fund
18. Engineer 42. Merchant Bankers
19. Secure 43. Credit Rating
20. money 44. S E B I
21. Merchant 45. Credit Rating
22. merchant 46. New Mutual funds
23. Industrial growth. 47. New Company
24. Syndicate 48. Book Building
25. risk 49. Rights Issue
26. Tarawani wala 50. Capital Issue Management.

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 cant
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
Indi1)
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 2. Mutual Funds


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

1. A Financial Institution is a________ ( )


1) Company 2) co-operative society 3) non profitable organization
4) 1 & 2 5) None of the above

2. The seller who is also called as____________ of a bill of exchange ( )


1) Holder 2) maker 3) drawer 4) Drawee 5) None of the above

3. The holder of B/E can _________________ the B/E up to the date of maturity or before the date
of maturity. ( )
1) Hold or discount 2) transfer 3) deliver 4) Issue 5) All of the above

4. Demand bill is the bill which is payable immediately at___________ ( )


1) Sight or on presentment 2)On demand 3)due course
4) settlement 5)clearing

5. ____is also called as time bill. ( )


1) Usance bill 2 tenure bill 3)due bill 4)draft 5) All of the above

6. Merchant bank is a _______ ( )


1) Financial intermediary 2)financial institution 3)bank 4)all
5) none of the above

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


1) Merchant banking 2) Investment banking 3) undertaking
4) All of the above 5) None of the above

8. The functions of merchants bankers are governed by ( )


1) SEBI 2)RBI 3) Stock exchange 4)All of the above
5) None of the above

9. Merchant banker is engaged in the business of ( )


1) issue management 2) Subscriptions 3) Allotment 4)All
5)None of the above

10. It is mandatory to hold a certificate for a merchant banker granted by ( )


1) SEBI 2) RBI 3) Ministry of finance 4) State government
5) All of the above

11. Merchant banker cannot carry ( )


1) fund based activity 2) deposits 3) leasing 4) All of the above
5) None of the above

12. SEBI means ( )


1) securities board 2)Securities & exchange board
3) securities & exchange board of India 4)All of the above 5)None of the above
13. SEBI is nodal agency to regulate ( )
1) capital market 2) Secondary market 3) stock market 4) All of the above
5) None of the above

14. SEBI is concerned with ( )


1) Protecting investors 2)protecting their rights 3) promote fair dealings
4) all of the above 5)None of the above

15. The most important information available to investor is ( )


1) Offered document 2) research reports 3) advertisement 4)all of the above
5) None of the above

16. Demat means ( )


1) material 2) D material 3) De Materialization 4) All of the above
5) None of the above

17. Number of stock exchanges in India ( )


1) 26 2)3 3)4 4)25 5)None of the above
18. ___ is an opinion on future ability & legal obligation of the issuer ( )
1) credit rating 2) credit measurement 3)credit worthiness 4) All of the above
5) None of the above

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


1) CRISIL 2) ICRA 3) CARE 4)All of the above
5) None of the above

20. Credit rating deals with ___ risk evaluation ( )


1) business risk 2) Financial risk 3)Both 4)All of the above
5)None of the above

21.The benefits of credit rating are ( )


1) Important information to investors 2) issuer credit worthiness 3) Intermediary
4)All of the above 5)None of the above

22.According to CRISIL highest safety is ( )


1)A A A 2)A A 3)A 4)A+ 5)None of the above

23. According to ICRA highest safety bond is ( )


1) L A A A 2) L A A 3) L A 4)L A + s
5) None of the above

24. Book building is a process where in issue price of a security is determine by ( )


1) Demand 2) Supply 3) Demand & supply 4) All of the above
5) None of the above

25. Book runner means ( )


1) Merchant Banker 2) Investor 3)issuer 4)All of the above
5) None of the above
26. ------ can be defined as An organization that acts as an intermediary between the issuers andthe
ultimate purchasers of securities in the primary security market. ( )
1) merchant banker 2) Investment Banker 3) Modern Banker
4) All of the above 5) None of the above
27. A merchant banker is an institution that helps companies to -------- capital. ( )
1) Raise 2) Distribute 3) Issue 4)All of the above
5) None of the above

28. Merchant bank is an organization that ------------------- corporate securities, provides advisory
services to its clients. ( )
1) Undertaken 2) Underwrites 3) Unify 4)All of the above
5) None of the above

29. The Activity of merchant bankers which facilitate issue process is termed as -----( )
1) Merchant banking 2) Investment Banking 3)Modern Banking
4) Mortgage Banking 5) All of the above

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. ( )
1) RBI 2) SEBI 3)IT 4)a& b 5) None of the above

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. ( )
1) 10 2) 11 3)12 4) 13 5)All of the above

32. ---------- is carrying on the business in accordance with the Securities and Exchange Board of
India Merchant Banking (Rules) 1992. ( )
1) Commercial Banking 2) Investment Banking 3)Merchant Banking
4) b&c 5) None of the above

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. ( )
1) Private 2) Public 3) Recurring 4) Fixed
5) All of the above
34. Registration with SEBI is --- to carry out the business of merchant banking in India. ( )
1) Optional 2) Mandatory 3) Not required 4) Up to RBI
5) None of the above

35. An applicant should comply with ------ of the following to be merchant banker: ( )
i. he 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
theapplicant should have been a registered merchant banker
1) i , ii &iv 2) i & ii 3) i, ii & iii 4) All
5) None of the above
36. The applicant , who wants to be merchant banker, should have a minimum net worth of
Rs.---------- crores ( )
1) 5 2) 6 3)7 4)8 5)None of the above

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. ( )
1) General 2) Special 3) Fund 4) Non-fund 5)All of the above
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. ( )
1) General 2)Special 3)Fund 4)Non-fund
5) None of the above
39. When a project export is on deferred Credit terms, we meet the financial requirement of our
exporter by Rupee/ Foreign currency ------------ ( )
1) Suppliers Credit 2) Buyers Credit 3) Suppliers Credit
4) Exporters credit 5) All of the above
40. Merchant Bank also participates in grant of credit to foreign buyers under the -------------
Scheme of Exim Bank. ( )
1) Suppliers Credit 2) Buyers Credit 3)Suppliers Credit 4)Exporters credit
5) None of the above

41. The East India Trading Company secured a Royal Warrant from England, providing the firm
with official rights to ----------- trading activities in India. ( )

1) Bureaucratic
2) Lucrative
3) Systematic
4) a&b
5) All of the above

42. -----------------Trading Company involved in financing, negotiating, and implementing trade


transactions in India ( )

1) Hudson Bay
2) India Trading
3) East India
4) All
5) None of the above
43. The American colonies also represent the product of merchant banking, as evidenced by the
activities of the famous -----------------.( )

1) East India
2) India Trading
3) Hudson Bay
4) All
5) None of the above

44. Merchant Banks can ------------- the Economic Development. ( )

1) Ruin
2) Fuel
3) Share
4) None of the above
5) All of the above

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
----------------- . ( )

1) Business process
2) Trading
3) Life
4) All
5) None of the above

46. Till early --------------, there was no merchant banking in the Indian banking system. ( )

1) 1960
2) 1965
3) 1967
4) 1970
5) None of the above

47. Grindlays Bank which started merchant banking services as far back as ------- in India. ( )

1) 1962
2) 1965
3) 1967
4) 1970
5) None of the above

48. Citibank started merchant banking services in ------------- ( )

1) 1969
2) 1970
3) 1972
4) 1975
5) None of the above

49. SBI started merchant banking services in ----------------.( )

1) 1969
2) 1970
3) 1972
4) 1975
5) None of the above

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. ( )

1) 1969
2) 1970
3) 1972
4) 1973
5) None of the above

Multiple Choice Questions KEY


1. Merchant Banker
2. Demand & supply
3. L AAA
4. AAA
5. All
6. Both
7. Crisil
8. Credit
9. 26
10. De Materialization
11. All
12. All
13. Capital market
14. Securities & exchange board of India
15. All
16. SEBI
17. Issue management
18. SEBI
19. Merchant banking
20. Financial intermediary
21. Usance bill
22. Sight or on presentment
23. Hold or discount
24. Holder
25. Company
26. merchant banker
27. Raise
28. Underwrites
29. merchant banking
30. RBI
31. a
32. Merchant Banking
33. Public
34. Mandatory
35. all
36. 5
37. Non-fund
38. fund
39. Exporters credit
40. Buyers Credit
41. Lucrative
42. East India
43. Hudson Bay
44. Fuel
45. Business process
46. 1960
47. 1967
48. 1970
49. 1972
50. 1973

Fill in the Blanks

1) ________________________ play an important role in economy.


2) Economic development depends on the available _________________________ in
theeconomy.
3Commercial 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 Indi1)
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
balancesheet.
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
theprocessing.
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 NPAs 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.1)
30) In India, it has become popular from ----------------.
31) The ------------ initiated the merchant banking activity in Indian Capital Market in 1969.
32) Its 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
2. Savings & Investments
3. trade & Commerce
4. balanced
5. public
6. Schedule bank
7. business
8. liquid assets
9. Statutory liquidity Ratio
10. Cash Reserve Ratio.
11. The open market operations
12. Asset Liability
13. Gap analysis
14. Duration Method
15. Non performing Asset
16. Indian Banking
17. Commercial banking
18. monopoly
19. Non banking finance companies
20. Nidhis or chit funds.
21. Investment company
22. Net owned fund.
23. 19 Public Sector
24. Company
25. Internal Factors
26. fee-based
27. arrange
28. Italy
29. U.K.,
30. 1983-84
31. Grindlays Bank
32. Financial Consultancy
33. City Bank
34. 1972
35. 1974
36. Non-Banking Financial Companies
37. Loan syndication
38. corporate counseling
39. corporate securities
40. Pricing of issue
41. post issue management
42. Underwriting
43. different companies
44. four categories
45. first category
46. second category
47. third category
48. fourth category
49. un-audited
50. less
Multiple Choice Questions - UNIT 2

1. A Financial Institution is a________ ( )


1) Company 2) co-operative society 3) non profitable organization
4) 1 & 2 5) None of the above

2. The seller who is also called as____________ of a bill of exchange ( )


1) Holder 2) maker 3) drawer 4) Drawee 5) None of the above

3. The holder of B/E can _________________ the B/E up to the date of maturity or before the
dateof maturity. ( )
1) Hold or discount 2) transfer 3) deliver 4) Issue 5) All of the above

4. Demand bill is the bill which is payable immediately at___________ ( )


1) Sight or on presentment 2)On demand 3)due course
4) settlement 5)clearing

5. ____is also called as time bill. ( )


1) Usance bill 2 tenure bill 3)due bill 4)draft 5) All of the above

6. Merchant bank is a _______ ( )


1) Financial intermediary 2)financial institution 3)bank 4)all
5) none of the above

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


1) Merchant banking 2) Investment banking 3) undertaking
4) All of the above 5) None of the above

8. The functions of merchants bankers are governed by ( )


1) SEBI 2)RBI 3) Stock exchange 4)All of the above
5) None of the above

9. Merchant banker is engaged in the business of ( )


1) issue management 2) Subscriptions 3) Allotment 4)All
5)None of the above
10. It is mandatory to hold a certificate for a merchant banker granted by ( )
1) SEBI 2) RBI 3) Ministry of finance 4) State government
5) All of the above

11. Merchant banker cannot carry ( )


1) fund based activity 2) deposits 3) leasing 4) All of the above
5) None of the above

12. SEBI means ( )


1) securities board 2)Securities & exchange board
3) securities & exchange board of India 4)All of the above 5)None of the above

13. SEBI is nodal agency to regulate ( )


1) capital market 2) Secondary market 3) stock market 4) All of the above
5) None of the above

14. SEBI is concerned with ( )


1) Protecting investors 2)protecting their rights 3) promote fair dealings
4) all of the above 5)None of the above

15. The most important information available to investor is ( )


1) Offered document 2) research reports 3) advertisement 4)all of the above
5) None of the above

16. Demat means ( )


1) material 2) D material 3) De Materialization 4) All of the above
5) None of the above

17. Number of stock exchanges in India ( )


1) 26 2)3 3)4 4)25 5)None of the above
18. ___ is an opinion on future ability & legal obligation of the issuer ( )
1) credit rating 2) credit measurement 3)credit worthiness 4) All of the above
5) None of the above

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


1) CRISIL 2) ICRA 3) CARE 4)All of the above
5) None of the above

20. Credit rating deals with ___ risk evaluation ( )


1) business risk 2) Financial risk 3)Both 4)All of the above
5)None of the above

21.The benefits of credit rating are ( )


1) Important information to investors 2) issuer credit worthiness 3) Intermediary
4)All of the above 5)None of the above

22.According to CRISIL highest safety is ( )


1)A A A 2)A A 3)A 4)A+ 5)None of the above
23. According to ICRA highest safety bond is ( )
1) L A A A 2) L A A 3) L A 4)L A + s
5) None of the above

24. Book building is a process where in issue price of a security is determine by ( )


1) Demand 2) Supply 3) Demand & supply 4) All of the above
5) None of the above

25. Book runner means ( )


1) Merchant Banker 2) Investor 3)issuer 4)All of the above
5) None of the above
26. ------ can be defined as An organization that acts as an intermediary between the issuers andthe
ultimate purchasers of securities in the primary security market. ( )
1) merchant banker 2) Investment Banker 3) Modern Banker
4) All of the above 5) None of the above
27. A merchant banker is an institution that helps companies to -------- capital. ( )
1) Raise 2) Distribute 3) Issue 4)All of the above
5) None of the above

28. Merchant bank is an organization that ------------------- corporate securities, provides


advisoryservices to its clients. ( )
1) Undertaken 2) Underwrites 3) Unify 4)All of the above
5) None of the above

29. The Activity of merchant bankers which facilitate issue process is termed as -----( )
1) Merchant banking 2) Investment Banking 3)Modern Banking
4) Mortgage Banking 5) All of the above

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. ( )
1) RBI 2) SEBI 3)IT 4)a& b 5) None of the above

31. It is registered with the Securities and Exchange Board of India as a Merchant Banker
underSection ----------- of the Securities and Exchange Board of India Act, 1992. ( )
1) 10 2) 11 3)12 4) 13 5)All of the above

32. ---------- is carrying on the business in accordance with the Securities and Exchange Board
ofIndia Merchant Banking (Rules) 1992. ( )
1) Commercial Banking 2) Investment Banking 3)Merchant Banking
4) b&c 5) None of the above

33. Merchant Bank does not accept or hold --------- deposits as defined in paragraph 2(1)(xii) of
theNotification No. DFC 118/DG(SPT)-98 dated January 31, 1998. ( )
1) Private 2) Public 3) Recurring 4) Fixed
5) All of the above
34. Registration with SEBI is --- to carry out the business of merchant banking in India. ( )
1) Optional 2) Mandatory 3) Not required 4) Up to RBI
5) None of the above

35. An applicant should comply with ------ of the following to be merchant banker: ( )
i. he 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
theapplicant should have been a registered merchant banker
1) i , ii &iv 2) i & ii 3) i, ii & iii 4) All
5) None of the above

36. The applicant , who wants to be merchant banker, should have a minimum net worth of
Rs.---------- crores ( )
1) 5 2) 6 3)7 4)8 5)None of the above

37. Bid Bond Guarantee, Advance Payment Guarantee , Performance Guarantee Down,
PaymentGuarantee , Retention Money Guarantee , Maintenance Guarantee, Overseas Borrowing
Guarantee are ------------ activities of merchant bank. ( )
1) General 2) Special 3) Fund 4) Non-fund 5)All of the above
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. ( )
1) General 2)Special 3)Fund 4)Non-fund
5) None of the above
39. When a project export is on deferred Credit terms, we meet the financial requirement of our
exporter by Rupee/ Foreign currency ------------ ( )
1) Suppliers Credit 2) Buyers Credit 3) Suppliers Credit
4) Exporters credit 5) All of the above
40. Merchant Bank also participates in grant of credit to foreign buyers under the
-------------Scheme of Exim Bank. ( )
1) Suppliers Credit 2) Buyers Credit 3)Suppliers Credit 4)Exporters credit
5) None of the above

41. The East India Trading Company secured a Royal Warrant from England, providing the firm
with official rights to ----------- trading activities in India. ( )

1) Bureaucratic
2) Lucrative
3) Systematic
4) a&b
5) All of the above
42. -----------------Trading Company involved in financing, negotiating, and implementing trade
transactions in India ( )

1) Hudson Bay
2) India Trading
3) East India
4) All
5) None of the above

43. The American colonies also represent the product of merchant banking, as evidenced by the
activities of the famous -----------------.( )

1) East India
2) India Trading
3) Hudson Bay
4) All
5) None of the above

44. Merchant Banks can ------------- the Economic Development. ( )

1) Ruin
2) Fuel
3) Share
4) None of the above
5) All of the above

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
----------------- . ( )

1) Business process
2) Trading
3) Life
4) All
5) None of the above

46. Till early --------------, there was no merchant banking in the Indian banking system. ( )
1) 1960
2) 1965
3) 1967
4) 1970
5) None of the above

47. Grindlays Bank which started merchant banking services as far back as ------- in India. ( )

1) 1962
2) 1965
3) 1967
4) 1970
5) None of the above

48. Citibank started merchant banking services in ------------- ( )

1) 1969
2) 1970
3) 1972
4) 1975
5) None of the above

49. SBI started merchant banking services in ----------------.( )

1) 1969
2) 1970
3) 1972
4) 1975
5) None of the above

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. (

1) 1969
2) 1970
3) 1972
4) 1973
5) None of the above
Multiple Choice Questions KEY

1. Merchant Banker
2. Demand & supply
3. L AAA
4. AAA
5. All
6. Both
7. Crisil
8. Credit
9. 26
10. De Materialization
11. All
12. All
13. Capital market
14. Securities & exchange board of India
15. All
16. SEBI
17. Issue management
18. SEBI
19. Merchant banking
20. Financial intermediary
21. Usance bill
22. Sight or on presentment
23. Hold or discount
24. Holder
25. Company
26. merchant banker
27. Raise
28. Underwrites
29. merchant banking
30. RBI
31. a
32. Merchant Banking
33. Public
34. Mandatory
35. all
36. 5
37. Non-fund
38. fund
39. Exporters credit
40. Buyers Credit
41. Lucrative
42. East India
43. Hudson Bay
44. Fuel
45. Business process
46. 1960
47. 1967
48. 1970
49. 1972
50. 1973

Fill in the Blanks

1) ________________________ play an important role in economy.


2) Economic development depends on the available _________________________ in
theeconomy.
3) Commercial banks provide for ___________________
4) The govt. has framed a policy of __________________ development in all regions in
acountry.
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 Indi1)
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
balancesheet.
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
theprocessing.
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 NPAs 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.1)
30) In India, it has become popular from ----------------.
31) The ------------ initiated the merchant banking activity in Indian Capital Market in 1969.
32) Its 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
merchantbanking 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
subscriptionthe 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
2. Savings & Investments
3. trade & Commerce
4. balanced
5. public
6. Schedule bank
7. business
8. liquid assets
9. Statutory liquidity Ratio
10. Cash Reserve Ratio.
11. The open market operations
12. Asset Liability
13. Gap analysis
14. Duration Method
15. Non performing Asset
16. Indian Banking
17. Commercial banking
18. monopoly
19. Non banking finance companies
20. Nidhis or chit funds.
21. Investment company
22. Net owned fund.
23. 19 Public Sector
24. Company
25. Internal Factors
26. fee-based
27. arrange
28. Italy
29. U.K.,
30. 1983-84
31. Grindlays Bank
32. Financial Consultancy
33. City Bank
34. 1972
35. 1974
36. Non-Banking Financial Companies
37. Loan syndication
38. corporate counseling
39. corporate securities
40. Pricing of issue
41. post issue management
42. Underwriting
43. different companies
44. four categories
45. first category
46. second category
47. third category
48. fourth category
49. un-audited
50. less
MULTIPLE CHOICE QUESTIONS - UNIT 3

1. The ownership of the asset passes on to the___________ ( )

1) User (hier) 2)Seller 3)Holder 4) All of the above 5) None of the above

2. A lease can be evaluated as ________________ Decision. ( )

1) Investment 2) Purchasing 3) Selling 4) All of the above 5) None of the above

3. B E L R ______________________( )

1) Break even lease rental. 2) Break Even Lease Receipts


3) Business entity leverage ratio 4) 1 & 2 5) None of the above

4. _________________is a type of finance lease. ( )


1)Direct Lease 2)indirect lease 3) finance lease 4) lease rental 5)None of the above

5. A manufacturer can also act as a _________________( )

1)lessor 2)lessee 3) Hire vendor 4) All of the above 5)None of the above

6. The loan is secured by the assets and the ______________( )

1)Lease rentals 2) Lease Payments 3) Leased Asset 4)All of the above 5)None of the above

7. The break even lease rental of the lessor sets the __________( )

1)Lower limit. 2)higher limit 3) break even limit 4) All of the above 5)None of the above

8. _______is a made of financing the price of goods to be sold on a future date. ( )

1)Hire purchase 2)leased agreement 3) investing 4)Purchasing5)None of the above

9. A hire purchase agreement is defined as _________kind of transaction. ( )

1)peculiar 2) distinct 3) specialized 4) An absolute 5)All of the above

10. The Depreciation on the asset is charged in the books of the ________( )

1)lessor. 2)lessee 3) hire vendor 4) Hire seller. 5)None of the above


11. The cost of maintenance of ___________is to be borne typically. ( )

1)hired asset 2)leased asset 3) purchased asset 4) All of the above 5)None of the above

12. Decision extension from the point of view of a hire is the cost of___________.( )

1)Hire purchase. 2)hire agreement 3) lease agreement 4) Leased sale. 5)None of the above

13. ________________is the hire purchase plan. ( )

1)Net present value 2) Present Value of inflows 3) internal rate of return


4) profitability index 5)All of the above

14. ______________is not levied on hire purchase transaction. ( )

1)Sales tax 2)Income tax 3) excise duties 4) import duties 5)None of the above
15. The interstate hire purchase deals attract ___________________.( )

1)Central sales tax. 2)Income tax 3) excise duties 4) import duties 5)All of the above

16. _____________movement of goods is not occasioned ( )

1)Interstate 2) Intra State 3) out of the country 4) All of the above 5)None of the above

17. The hire purchase transaction can be used as a ______________device. ( )

1)Tax planning 2)Hiring 3) Moving 4) All of the above 5)None

18. ________________is a multipurpose financial institution. ( )

1)Development bank 2) Andhra Bank 3) State Bank 4)All of the above 5)None

19. Lease finance and_______________ are generally used to acquire capital goods. ( )

1)hire purchase 2) Lease rentals 3) Hiring finance 4) Leased asset 5)All of the above

20. The cost of acquisition in hire purchase is relatively ________.( )

1)low 2) high 3) average 4) Nil 5)None of the above


21. Lease financing is in variably _______ financing. ( )

1)100% 2)50 % 3) 75% 4) 25% 5)None of the above

22. ____________is never transferred to the user. ( )

1)Ownership 2)Asset 3) Documents 4) All of the above 5)None of the above

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


1)Pool 2) lease 3) Price 4) Deal 5)None of the above

24. The tax expects of leasing pertain to both income tax and____________( )

1)Sales tax. 2) export duties 3) import duties 4) All of the above 5)None of the above
25. The Computation of taxable income of an assesse under the provisions of the ___________( )

1)Income tax act. 2)sales tax 3) export duties 4) import duties 5)None of the above

26. Leasing in the world started in 200 BC in ------------- civilization. ( )

1)Sumerians 2)Harappa 3) Indus 4 All 5)All of the above

27. The concept of financial leasing was pioneered in India during ---------------.( )

1) 1971 2) 197 3 ) 1973 4) 1974 5)1977

28. The first leasing company was setup by the ------------ group in 1973 in Madras. ( )

1)Chidambaram 2)Chakkilam 3) Travancore 4)Vellore 5)Chennai

29. The person delivering the goods is called the ----------- ( )


1) Bailor 2) Bailee 3)Vendor 4) Supplier 5) Agent

30. The person to whom they are delivered is called ---------( )

1)Bailor 2)Bailee 3)Vendor 4)Supplier 5)Agent

31. An equipment lease transaction is regarded as contract of ------------( )

1) Negotiation
2) Agreement
3) Bailment
4) Arrangement
5) Contract

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

1) Indian contract
2) Indian Negotiation Act
3) Indian Bailment act
4) Indian Arrangement Act
5) None of the above

33. As per the --------------, the lessee can claim lease rentals as tax deductible expenses.
1) Income tax
2) Sales tax
3) Commercial tax
4) a&b
5) None of the above

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


1) Exempted
2) Partially exempted
3) Taxable
4) Refundable
5) All of the above

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

1) Income tax
2) Sales tax
3) Commercial tax
4) a&b
5) None of the above

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

1) Leasing
2) Factoring
3) Forfeiting
4) Hire Purchase
5) None of the above

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

1) Leasing
2) Factoring
3) Hire Purchase
4) Forfeiting
5) All of the above

38. ------------------- given on hire with an option to buy Hire Purchase

1) Bonds
2) Stock
3) Debentures
4) Equipment
5) None of the above

39. In hire purchase, depreciation and investment allowance can be claimed by ---------

1) Bailor
2) Bailee
3) hirer
4) Hiree
5) None of the above

40. In --------------, the Transfer of right of use by the owner (Lessor) to the User (Lessee) is done for an
agreed period of time.

1) Equipment Leasing
2) Rental Leasing
3) Fixed Leasing
4) Operational Leasing
5) All of the above

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.

1) Lease
2) Hiring
3) Hire Purchase
4) Forfeiting
5) None of the above

42. A ---------------- is a lease that transfers substantially all the risks and rewards incident ownership of
an asset.

1) Financial Leasing
2) Operating Leasing
3) Equipment Leasing
4) All of the above
5) None of the above

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

1) Financial Leasing
2) Operating Leasing
3) Equipment Leasing
4) All of the above
5) None of the above

44. A ------------------- is a lease that is cancellable when the occurrence of some remote contingency.

1) Cancellable
2) Non-cancellable
3) financial
4) Operational
5) None of the above

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.

1) Gestation period
2) Assessment Period
3) Lease Term
4) Agreement period
5) All of the above

46. It is the amount for which an asset should be exchanged or a liability settled between
knowledgeable, willing parties in an arms length transaction.

1) Financial Leasing
2) Operating Leasing
3) Equipment Leasing
4) All of the above
5) None of the above

47. The period over which an asset is expected to be economically usable by one or more
users-------------

1) Operating Life
2) Expected Life
3) Economic Life
4) Usefullife
5) None of the above

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

1) Operating Life
2) Expected Life
3) Economic Life
4) Usefullife
5) All of the above
49. -------------- of a leased asset is the estimated fair value of the asset at the end of the least term.

1) Residual value
2) Expected Value
3) Economic Value
4) All of the above
5) None of the above
50. The part of the residual value which is guaranteed by the lessee or by a party on behalf of
lessee----------------------.

1) Residual value
2) Expected Value
3) Economic Value
4) Guaranteed residual value
5) None of the above

Multiple Choice Questions KEY

1. User (hirer)
2. Investment
3. Break even lease rental
4. Direct Lease
5. Lessor
6. Lease rentals
7. Lower limit
8. Hire purchase
9. Peculiar
10. Lessor.
11. Hired asset
12. Hire purchase

13. Net present value


14. Sales tax
15. central sales tax
16. Inter state
17. Tax planning
18. Development bank
19. Hire purchase
20. Low
21. 100%
22. Ownership
23. Pool
24. Sales tax
25. Income tax act.
26. Sumerians
27. 1973
28. Chidambaram
29. Bailor.
30. Bailee
31. Bailment
32. Indian contract
33. Income tax
34. Taxable
35. IT Act
36. Hire purchase
37. hire purchase
38. Equipment
39. Hirer
40. Rental Leasing
41. Lease
42. Finance lease
43. Operating Leasing
44. Non-cancelable
45. Lease term
46. Financial Leasing
47. Economic life
48. Useful life
49. Residual value
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 & Commerce
4. Balanced
5. Public
6. Schedule bank
7. business
8. Liquid assets
9. Statutory liquidity Ratio
10. Cash Reserve Ratio.
11. The open market operations
12. Asset Liability
13. Gap analysis
14. Duration Method
15. Non performing Asset
16. Indian Banking
17. Commercial banking
18. Monopoly
19. Non banking finance companies
20. Nidhis or chit funds.
21. Investment company
22. Net owned fund.
23. 19 Public Sector
24. Company
25. Internal Factors
26. selling goods
27. last Installment
28. Hire purchase
29. Hire Purchase Act, 1972
30. flat rate.
31. I = (n / n-1)2F
32. stock on hire.
33. un-matured finance charges
34. Unguaranteed
35. Net investment
36. Implicit interest
37. Contingent rent
38. service lease
39. less than
40. Financial lease
41. Operating leasing
42. A leverage lease
43. sale and lease back
44. transnational leasing
45. Cross Border Lease
46. Default risk
47. Residual Value Risk
48. Interest rate risk
49. Purchasing Power Risk
50. Political Risk

MULTIPLE CHOICE QUESTIONS - UNIT 4

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

1)Form 2)Junk 3)value 4)pool 5)instrument

2. Insurance is a ---------.( )

1)Contract 2) contrast 3)commodity 4)community 5)All the above

3. The document of laying down the terms of the contract is called ------------------( )

1)Insurance policy 2) Insurance claim 3)Insurance Product 4)1&2 5)None of the above

4. The subject matter of insurance ------------( )

1)Money 2) Health 3) Property 4) 1&2 5)None

5. Depending upon the subject matter the insurance is classified into -------types. ( )

1)One 2)Two 3)Three 4)Four 5)None of the above


6. Life Insurance is an Insurance which considers life of -----------------.( )

1)An individual 2)Buildings 3)Machines 4)Crop 5)None

7. -------------- covers the risk caused by fire , accident etc., ( )

1)Life 2)general 3)Fire 4)Accident 5) None of the above

8. There is a fixed obligation in ----------------.( )

1)Fixed 2)Variable 3)Semi-variable 4)1&2 5)None of the above

9. General Insurance does have ------------- obligation. ( )

1)Form Fixed 2)Variable 3)Semi-variable 4)a&b 5)None of the above

10. The Interest which the insured has in the subject matter of insurance is known as -------------.
( )

1)Simple 2)Compound 3)Insurable 4)1&2 5)None

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

1)Fixed 2)Variable 3)Semi-variable 4)1&2 5)None of the above

12. General Insurance policy is considered as contract of ---------------.( )

1)Indemnity 2)Identity 3)Indefinite 4)2&3 5)None

13. Insurable Interest is measured in case of ------------- Insurance. ( )

1)Life 2)general 3)Fire 4)Accident 5)None of the above

14. Measurement of Insurance is not possible in case of --------- Insurance. ( )

1)Life 2)general 3)Fire 4)Accident 5)All the above

15. General Insurance policy is --------- contract. ( )

1)Fixed 2)Variable 3)Semi-variable 4)Annual 5)None of the above


16. Life Insurance is a --------- contract. ( )

1) Fixed 2)Variable 3)Continuous 4)Annual 5)None of the above

17. The Insurance Act, --------- Provides broad frame work for Insurance. ( )

1)1938 2)1948 3)1958 4)1968 5)1955

18. Insurance business can be done by Public Company, ------------ etc., ( )

1)An Individual 2)Public Company 3)Cooperative Society 4)1 & 2 5)None

19. Any Public company or Cooperative society having --------- of paid up capital is eligible
forinsurance business. ( )

1)100 2)200 3)300 4)400 5)500

20. No body of insurance company should hold more than -------- of stake.

1)16 2)26 3)36 4)46 5)66

21. Insurance Business after 1999 is subjected to ----------- Act. ( )

1)IDRA 2)IRDA 3)HMDA 4)HYMA 5) None of the above

22. Life Business means the business of effecting contracts of insurance upon --------( )

1)Living Beings Life 2)Human 3)Buildings Life 4)1&2 5)None

23. -----------Insurance is carried on single or in combination of different things. ( )

1)Life 2)general 3)Fire 4)Accident 5)None of the above

24. -------- refers to a situation where there is the possibility of loss. ( )

1)Threat 2)Risk 3)Turmoil 4)1&3 5)None

25. ------------ is a condition in which there is a possibility of an adverse deviation from


desiredoutcome that is expected. ( )

1)Threat 2)Turmoil 3)Risk 4) a&c 5)None of the above


26. An event or occurrence which is unforeseen and unlimited is called as_________( )

1)Accident. 2)Incident 3)Indemnity 4)All the above 5) 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_________________.( )

1) Commission 2)Brokerage 3)Charges 4)Premium 5)None of the above

28. ________________is given to the policy holder to pay the premium amount aftercompletion
of maturity date. ( )

1)Grace days 2)additional days 3)further days 4)All the above 5) None of the above

29. The printed form which serves as the contract between an insurer and an insured
is________________( )

1) Insurance policy 2) an agreement 3) a contract 4)Regulation 5) None of the above

30. In insurance the chance of injury, damage or loss is referred as ____________.( )

1)Risk 2)danger 3)accident 4)Health 5) None

31. Insurance sector in India is one of the booming sectors of the economy and is growing atthe
rate of _______________ per cent annum.

1) 15-20 % .
2) 20%
3) 30%
4) 40%
5) 60%

32. Together with banking services, it contributes to about ____________ to the country's GDP.

1) 7%
2) 8%
3) 9%
4) 2%
5) 3%
33. Insurance is a federal subject in India and Insurance industry in India is governed
byInsurance Act, ______________

1) 1938
2) 1948
3) 1958
4) 1968
5) 1970

34. The origin of life insurance in India can be traced back to 1818 with the establishment ofthe
_________________Company in Calcutt1)

1) Oriental Life Insurance


2) LIC
3) GIC
4) IDBI
5) IFS
35. The Bombay Mutual Life Insurance Society that started its business in 1870 was the
firstcompany to charge same premium for both _______________and non-Indian lives.

1) Indian
2) foreign
3) 1&2
4) Banking industry
5) None of the above

36. In 1912, insurance regulation formally began with the passing of Life InsuranceCompanies
Act and the _______________Act.

1) PF
2) ESI
3) Gratuity
4) All the above
5) None of the above

37. In 1938, the first comprehensive legislation regarding insurance was introduced with
thepassing of Insurance Act of 1938 that provided strict State ________________over insurance
business.

1) Control
2) liberal
3) reform
4) all
5) None of the above
38. In 1956, Government of India brought together ___________ Indian and foreign
insurersand provident societies under one nationalized monopoly

1) 245
2) 240
3) 255
4) 260
5) 290

39. In 1993, the first step towards insurance sector reforms was initiated with the formation of
__________Committee

1) Malhotra
2) Sundaram
3) Vivekan
4) Narasimham
5) Dinkar

40. The committee was formed to evaluate the Indian insurance industry and recommend
its________________direction

1) Future
2) Past
3) Present
4) 1946
5) None of the above

41. _______________Committee also proposed setting up an independent regulatory body.

1) Malhotra
2) sundaram
3) vivekan
4) Narasimham
5) Dinakaran

42. Insurance sector in India was liberalized in March 2000 with the passage of
the__________________________

1) IRDA
2) SEBI
3) RBI
4) LIC
5) None of the above

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

1) 26 %
2) 25%
3) 20%
4) 15%
5) 50%

44. The opening up of the ________________sector has led to rapid growth of the sector.

1) insurance
2) Banking
3) Service
4) industry
5) All the above

45. Presently, there are 16 life insurance companies in the market.

1) 15
2) 16
3) 20
4) 50
5) Nil

46. Presently, there are 15 non-life insurance companies in the market.

1) 15
2) 16
3) 20
4) 45
5) NIL

47. The potential for growth of insurance industry in India is immense as nearly _______
percent of Indian population.

1) 80
2) 70
3) 60
4) 50
5) 45

48. ------------ should be given that LIC should pay interest on delays in payments beyond 30 days.
1) Customer service
2) Govt. service
3) Banking service
4) All the above
5) None of the above
49. Committee proposed that Insurance companies must be encouraged to set
up________________ plans.

1) Unit linked pension


2) Unit linked insurance
3) Unit linked investment plan
4) Unit linked tax plans
5) None of the above

50. To Improve the Insurance Industry _______________of operations and updating


oftechnology to be carried out in the insurance industry.

1) Computerization
2) modernization
3) Liberalization
4) Decentralization
5) Nationalization
MULTIPLE CHOICE KEY: UNIT 4

1. Pool
2. Contract.
3. Insurance Policy
4. property
5. two
6. An individual
7. General insurance
8. Life Insurance
9. Variable
10. Insurable interest
11. contract indemnity
12. Indemnity.
13. General
14. Life
15. Annual
16. Continuous
17. 1938
18. Cooperative society
19. 100 Crores
20. 26
21. IRDA
22. Human life.
23. General
24. Risk
25. Risk
26. Accident
27. commission
28. Grace days
29. insurance policy
30. Risk
31. 15-20 per cent annum
32. 7 per cent
33. 1938
34. Oriental Life Insurance
35. Indian
36. PF
37. Control
38. 245
39. Malhotra
40. Future
41. Malhotra
42. IRDA
43. 26 %
44. insurance
45. 16
46. 15
47. 80
48. Customer service
49. unit linked pension
50. Computerization

FILL IN THE BLANKS


1) ----------- is a condition where the outcome of an event is uncertain and there are
twopossible 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
knowledgeabout 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
hasbeen 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
ofloss 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
professionalqualification, 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
damagesto 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 wont be a problem
ofliquidities.
33) Life policies of any type can be either ___________________ or________________
34) The sum paid out on ______________ or at ______________ is the assured of the
policiesin 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
2. Outcome
3. Uncertainty
4. Without something
5. Expired cost
6. Peril
7. Hazard
8. Two
9. Perils
10. Intangible hazard
11. Quantifiable risks
12. Non-quantifiable risks
13. Dynamic risks
14. Dynamic risks
15. Static risks
16. Static risks
17. Measurable
18. Speculative risks
19. Pure risks
20. Insurable
21. pure risks
22. personal risks
23. Liability risks
24. Risks Retention
25. Self Insurance
26. Non Banking
27. Protection
28. 1818.
29. Mixed and decentralized.
30. 1956
31. Monolithic org
32. Long term liabilities
33. With profits or with out profits.
34. Maturity or death
35. Bonuses
36. Claim
37. Present value
38. Save taxes.
39. Investors.
40. Surplus ; greatest
41. Revenue Surplus
42. Reversionary bonus.
43. Capital Surplus
44. Rural areas
45. Death or maturity.
46. Life insurance and general insurance.
47. Premium
48. Claim
49. General insurance
50. Life insurance

UNIT-5
Multiple Choice questions]

1.An agreement in which receivables are sold by a firm to the financial intermediary is known
as__________________ ( )

1)Factoring 2)Bills receivables 3)Bills payables 4)Bills discounting 5)None of the above

2. The main function of factoring is the realization of ____________( )

1)Credit sales 2)Cash sales 3)Both 4)1&2 5)None

3. The two parties in the contract are _____________( )

1)Two buyers 2)Two sellers 3)Buyer & seller 4)1 & 2 5) None

4. ____________is a document between buyer and seller which is known as Memorandum


ofUnderstanding. ( )
1)Letter of exchange 2)Letter of lading 3)Bills discounting 4) Bills Receivable 5)None

5. There are __________ types of factoring services, ( )

1) 2 2) 3 3) 4 4) 5 5) 6

6. Bills discounting is always with ______________( )

7. The discounted bills may be _______________several times. ( )

1)Sold 2) Purchased 3)Rediscounted 4)All the above 5) None

8. _________________offers a very flexible way of generation against the receivables. ( )

9. The Non Recourse factoring is also known as____________( )

1)Full factoring 2)Partial factoring 3)Non- factoring 4)All 5)None of the above
10. Frame work of credit rating in India

1)Registration 2)Restriction of the ratio of security 3)Procedure for inspection


4)Action in case of default. 5)All of the above

11. Advantages of credit rating ( )


1) Independent evaluation 2) Low cost information 3) Investor protection
4) All of the above 5) None of the above

12. The extensive compilation & analysis of data for rating business is also used to
provideinformation services to_______________ clients. ( )

1)Corporate 2)Individuals 3)Financial institutions 4)All the above 5)None of the above

13. Most of the firms treat account receivable as a marketing tool to promote sales
&__________ ( )

1)Profit 2)Cost 3)Demand 4)1 & 2 5)None

14. The Bills Receivable constitute a significant portion of _______( )

1)Working Capital 2)Current assets 3)Current liabilities 4)All 5)None of the above

15. The receivables represent ___ allowed to customer( )

1)Credit 2)Sales 3)Cost 4)Profit 5)None of the above

16. ___ is important while formulating credit policy. ( )

1)Receivables management 2)Credit management 3)Assets management


4)2 &3 5) None of the above

17. Following are the benefits of receivables management. ( )

1)Increasing sales 2)Increasing profit 3)Extra profit 4)All 5)None of the above

18. Receivables management has the following steps. ( )

1)Credit policy 2)Credit evaluation 3)Credit control 4)All 5)None

19. Factoring means converting sales invoices into _____ ( )


1)Cash 2)Receivables 3)Payables 4)All the above 5)None of the above

20. ____ is nothing but a substitute of a in-house management of receivables ( )

1)B/R 2)B/P 3)Factoring 4)All 5)None

21. Forfeiting means __ the right to future payments through discounting future cash flows. ( )

1)Forfeiting 2)Discounting 3)Compounding 4)All 5)None

22. A factor firm requires an approval from ___ ( )

1) RBI 2) SEBI 3) Ministry of finance 4) Indian government 5)None

23. The factor purchases clients ____________( )

1)Debtors 2) Creditors 3) Sales 4) All 5)None

24. The benefits of factoring are ( )

1) Better cash flows 2) Better assets management 3) Better administration 4) All 5)None

25. The cost of factoring are ( )

1) Fees 2) Interest cost 3) Non monetary cost 4) All 5)None

26. Bill discounting is done always with -----------. ( )

1) Resource 2) Recourse 3) Remarks 4) 1 & 2 5)None

27. ------------- can be either with or without recourse ( )

1) Factoring 2) Discounting 3) Forfeiting 4) 1 & 3 5)None

28. In -------------------- drawer undertakes the responsibility of collecting the bills and
remittingthe proceeds to financing agency,

1) Factoring
2) discounting
3) Forfeiting
4) 1&3
5) None

29. Whereas a --------- usually undertakes to collect the bills of the client

1) Factor
2) Drawer
3) Forfeiter
4) 1&3
5) None

30. Bill discounting facility implies only ------------- of finance

1) Factor
2) Loss
3) Profit
4) Provision
5) None

31. Discounted bills may be rediscounted ------------- before they mature for payment.

1) Once
2) Twice
3) Thrice
4) Several Times
5) None of the above

32. Debts purchased for factoring cannot be rediscounted, they can be -------------

1) Refined
2) Forfeited
3) Refinanced
4) 1&3
5) None of the above

33. Factoring implies the provision of ---------- finance against several unpaid trade generated
invoices in batches.

1) Short
2) Bulk
3) Refinance
4) 1&2
5) None

34. Bill financing is -------------- transaction-oriented activity


1) Individual
2) Double
3) Multiple
4) All
5) None

35. Factoring is an -------------- mode of financing

1) Off-balance
2) On-balance
3) Special Drawing
4) 1&2
5) None

36. Bill discounting -------------- involve assignment of debts as is the case with factoring

1) Does
2) Does not
3) May
4) May not
5) None

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

1) One
2) Two
3) Three
4) Four
5) Five

38. ----------- system results in to separate but inter-linked agreements such as between
exporterand export factor or between export factor import factor.

1) One
2) Two
3) Three
4) Four
5) Five

39. ---------------- provides a link between export factor and the importer and serves to solve
theinternational barriers like language problem, legal formalities and so on.

1) Export factor
2) Import Factor
3) Exporter
4) Importer
5) None

40. --------------- also underwrites customer trade credit risks, collects receivables and
transfersfunds to the export factor in the currency of the invoice

1) Export factor
2) Importer
3) Exporter
4) Importer Factor
5) None

41. ---------------- informs the export factor about the export of goods to a particular importclient
domiciled in a specified country.

1) Export factor
2) Import Factor
3) Exporter
4) Importer
5) None

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.

1) Export factor
2) Import Factor
3) Exporter
4) Importer
5) None
43. Export receivables are factored on a ------------- basis.

1) Resource
2) Recourse
3) Non-recourse
4) Remarks
5) None

44. --------------- does credit checking, sales ledgering and collection to the import factor

1) Exporter
2) Importer
3) Export factor
4) Import Factor
5) None
45. Import factor collects the ------------ from the importer and effects payments to the
exportfactor on assignment/maturity/collection as per the terms of assignment in the currency of the
invoice

1) Bills
2) Order
3) Statement
4) Payment
5) None

46. The export factor makes payment to the exporter upon --------------------- depending uponthe
factoring agreement between them

1) Assignment
2) Maturity
3) Collection
4) Either or
5) None

47. Forfeiting is a form of financing of -------------------- pertaining to international trade.

1) Receivables
2) Payables
3) Assets
4) 1&2
5) None

48. -------------- denotes the purchase of trade bills/promissory notes by a


bank/financialinstitution without recourse to the seller.

1) Factoring
2) Discounting
3) Forfeiting
4) 1&3
5) None

49. In pursuance of a commercial contract between an exporter and importer, the exporter
sellsand delivers the goods to the importer on a --------------- basis

1) Down Payment
2) Deferred
3) Exporter
4) Importer
5) None
50. Importer draws a series of ---------------- in favor of the exporter for payment
includinginterest charge.

1) Bill
2) LOC
3) Promissory Notes
4) Either 1 or 2
5) None

Multiple Choice Questions

1. Factoring
2. Credit sales
3. Buyer & seller
4. Letter of exchange
5. 2
6. Recourse.
7. Rediscounted
8. Factoring
9. Full factoring
10. All of the above
11. All of the above
12. Corporate
13. Profit
14. Working capital
15. Credit
16. Receivables management
17. All
18. All
19. Cash
20. B/R
21. Forfeiting
22. RBI
23. Debtors
24. All
25. All
26. Recourse
27. Factoring
28. Bill discounting
29. Factor
30. Provision
31. Several times
32. Refinanced
33. Bulk
34. Individual
35. Off-balance
36. Does not
37. Four
38. Two factors
39. Import factor
40. Import factor
41. Exporter
42. Export factor
43. Non-recourse
44. Export factor
45. Payment
46. Assignment or maturity or collection
47. (export) Receivables
48. Forfeiting
49. Deferred payment
50. Promissory notes

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 clients ____________ on transacting a sales deal an invoice is
sentby the client to the customer.
7) The factor undertakes to collect ____________________ on behalf of the client
relievinghim of the problems involved in collection.
8) The unique feature of factoring is that a factor _____________ the book client at a price
anddebts 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
goodsassigning 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/Es 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
highinterest 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 Indi1)
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 Indi1)
51) ICRAs 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) ICRAs 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
2. Realization
3. Seller
4. Memorandum of Understanding
5. 80 %
6. Sales ledger
7. Receivables
8. Purchases
9. Without recourse
10. Recourse
11. Disclosed factor
12. International factoring
13. Undertaking
14. Recourse
15. Bill discounting
16. Rediscounted
17. Bulk financing
18. Factoring commission
19. Recourse factoring
20. RBI
21. Subsidiary/ joint venture factoring company
22. Finance companies
23. Disclaimer certificate
24. Documentary bill
25. Clean bills
26. Credit rating
27. Financial history
28. Pay back a loan
29. High risk
30. Borrowing and repayment
31. Credit
32. Capacity of the issuer of debt security
33. Code numbers
34. Security
35. Debt rating
36. Fiduciary relationship
37. Investor protection
38. Credit Rating Information Services Ltd
39. Investment Information and Credit Rating Agency of India
40. CARE
41. Duff Phelps Credit Rating Pvt. Ltd. (DCR India)
42. January 1, 1988
43. 4 crores.
44. CRISIL
45. Service rating agency
46. Opinions on risk
47. Rate the debt obligations
48. Timely payment of interest and principal
49. 1991
50. Investment information

51. Moody's Investors Service


52. Industrial Finance Corporation of India
53. 10 crores
54. Rs. 3.50
55. 1993

Assignment Questions
Unit 1
1. Define Financial services.

2. Discuss the structure of the Financial Service Sector in India.

3. What is Financial Institutions?

4. Discuss the various Services rendered by the Financial Institutions.

5. What is Financial Market?

6. What do you mean by Financial Engineering?

7. Define financial innovation .

8. Discuss the need and importance of Financial Engineering.

9. What are the different financial services provided by Indian financial system?

10. Name some financial products provided by financial service industry

11. Distinguish between financial asset and physical asset

12. What is money market

13. What is capital market?

14. Who are different financial intermediaries?

15. What do you mean by financial rate of return

16. What are the components of financial capital market?

17. Explain some of financial assets traded in stock market?

18. What are different characterstics of financial instruments

19. What are different financial securities traded in stock market?

20. What is the importance of capital market and money market?


Unit 2

1. Define the Concept of Leasing.


2. Discuss the legal, tax and Accounting Aspects of leasing in India.
3. Define Gross Yield based Pricing
4. Explain IRR based Pricing
5. Explain Break-even lease rental.
6. Explain financial Lease vs. Operating Lease
7. Explain Sale and Lease back vs. Direct Lease
8. Explain Bipartite Lease vs. Tripartite Lease
9. What is Hire Purchase?

10.Explain the characteristics leasing ?


11. define hire purchase ?
12. differentiate hire purchase and leasing ?
13. what is cross border lease?
14. what is vendor leasing?
15. what is leverage leasing ?
16. discuss advantages and disadvantages of leasing?
17. what are different types of leasing?
18. explain briefly the structure of leasing ?
19. what are the contents of leasing agreement?
20.who are the parties involved in leasing and hirepurchase?

Unit 3

1. What is Factoring?
2. Discuss various types of Factoring.
3. Distinguish Between Factoring and Discounting.
4. Discuss about different Credit Rating Agencies in India.
5. Discuss the Types of Rating
6. Explain Costs of Factoring
7. Explain Types of Export Factoring
8. Briefly explain calculationof discount charges and effective interest rates of factoring
9. Define bill discounting
10.Distinguish bill discounting vs factoring
11.Explain the features of kalian sundaram committee
12.Explain decision analysis of fctoring
13.Who are parties involved in factoring
14.What are the functions of factor
15. Explain the evaluation procedure of factoring
16.Explain the evaluation procedure for bill discounting
17.Define forfeiting
18. What are different characteristics of factoring
19.Explain briefly difference between factoring and forefeiting
20.What are different functions of forfeiting?

Unit 4
1. What is venture capital?

2. State the features of venture capital?

3. Explain the various stages of venture capital fianciang?

4. Explain the importance of venture capital

5. Write short notes on SBI CAP?

6. What are the disinvestment options available in india?

7. Explain the guidelines for venture capital in india?

8. Explain the performance of various venture capital firms?

9. What is the strategic role of venture capital financing?

10.What are different methods of venture capital?

11.What are the advantages of venture capital?

12.Explain the scope of venture capital ?


13.What are the features of venture capital ?

14.Explain revenue multiplier method?

15.Explain first Chicago method?

16.Explain funding and entry strategies?

17.Explain the valuation method of venture capital financing?

18.Explain the process of venture capital funding?

19.Discuss conventional valuation method ?

20.Discuss briefly regulatory framework of Indian venture capital system?

Unit-5
1. What is a portfolio management?

2. Define merchant banker?

3. State the qualities required for a merchant banker?

4. Write a note on project counseling?

5. Distinguish between commercial bank and merchant bank?

6. Explain pre-issue management

7. Explain the services of merchant bankers?

8. Explain the classification of merchant banking?

9. Explain merchant bankers market making process?

10.What are the eligibility norms for merchant banking?

11.Define:

a. Underwriter

b. Registrar
c. Lead manager

12.Explain book building process?

13.What is gren shoe option?

14.What are different SEBI guidelines relating to new issue of securities?

15.Define credit rating?

16.What are the advantages of credit rating?

17.What are different types of credit rating?

18.Explain credit rating methodology?

19.Explain the process of credit rating ?

20.What are different dimensions of credit rating methodology?