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B Com Exam  >  B Com Tests  >  Business Economics & Finance  >  Test: Business Finance - 2 - B Com MCQ

Test: Business Finance - 2 - B Com MCQ


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10 Questions MCQ Test Business Economics & Finance - Test: Business Finance - 2

Test: Business Finance - 2 for B Com 2024 is part of Business Economics & Finance preparation. The Test: Business Finance - 2 questions and answers have been prepared according to the B Com exam syllabus.The Test: Business Finance - 2 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Business Finance - 2 below.
Solutions of Test: Business Finance - 2 questions in English are available as part of our Business Economics & Finance for B Com & Test: Business Finance - 2 solutions in Hindi for Business Economics & Finance course. Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free. Attempt Test: Business Finance - 2 | 10 questions in 10 minutes | Mock test for B Com preparation | Free important questions MCQ to study Business Economics & Finance for B Com Exam | Download free PDF with solutions
Test: Business Finance - 2 - Question 1
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What is the primary purpose of raising capital for a new venture?

Detailed Solution for Test: Business Finance - 2 - Question 1
The primary purpose of raising capital for a new venture is to lay the groundwork for selling and establishing important relationships. This initial capital is crucial for turning ideas and dreams into a functioning business by funding operations, product development, and building the necessary infrastructure.
Test: Business Finance - 2 - Question 2
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What distinguishes debt financing from equity financing for a business?

Detailed Solution for Test: Business Finance - 2 - Question 2
Debt financing distinguishes itself from equity financing by creating financial obligations. When a business opts for debt financing, it involves borrowing money that must be repaid with interest, which represents a financial obligation to the lender. Equity financing, on the other hand, involves selling ownership stakes in the business to investors.
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Test: Business Finance - 2 - Question 3
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Why is it important for businesses to maintain a healthy balance between debt and revenues?

Detailed Solution for Test: Business Finance - 2 - Question 3
Maintaining a healthy balance between debt and revenues is important for businesses to ensure long-term financial stability. Excessive debt compared to revenues can lead to financial problems, making it crucial for a business to manage its debt ratios effectively to avoid financial instability and maintain its operations.
Test: Business Finance - 2 - Question 4
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What financial plans should businesses create to prepare for economic downturns?
Detailed Solution for Test: Business Finance - 2 - Question 4
To prepare for economic downturns, businesses should create financial plans that include cash savings and smart investments. These plans help the business maintain financial stability during challenging economic periods by ensuring they have the necessary cash reserves and are making strategic investments that can help weather the downturn.
Test: Business Finance - 2 - Question 5
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When does a business typically need significant financial investment for growth?
Detailed Solution for Test: Business Finance - 2 - Question 5
A business typically needs significant financial investment for growth when aiming for greater success and expansion. Success often leads to increased demand for resources, including capital, to acquire new assets, hire more staff, and expand operations. Businesses must carefully consider their financial options to support this growth.
Test: Business Finance - 2 - Question 6
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What is the top priority for businesses regarding their ability to make payroll?
Detailed Solution for Test: Business Finance - 2 - Question 6
The top priority for businesses regarding their ability to make payroll is ensuring a strong cash flow. Having enough cash on hand to meet payroll obligations is crucial to retaining dedicated staff and maintaining the integrity and longevity of the company. Without a reliable cash flow, a company may struggle to pay its employees on time.
Test: Business Finance - 2 - Question 7
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What distinguishes mezzanine finance from traditional debt financing?
Detailed Solution for Test: Business Finance - 2 - Question 7
What distinguishes mezzanine finance from traditional debt financing is that mezzanine finance involves subordination to senior lenders. In mezzanine financing, the lender has the right to convert the debt into equity ownership if the loan is not paid back as agreed. This subordination feature sets it apart from traditional debt financing.
Test: Business Finance - 2 - Question 8
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What type of investors typically provide funding at an early stage in a business's development?
Detailed Solution for Test: Business Finance - 2 - Question 8
Business angels and private investors typically provide funding at an early stage in a business's development. These individuals or groups invest in startups and small businesses, often in exchange for equity ownership. They play a vital role in helping businesses get off the ground.
Test: Business Finance - 2 - Question 9
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What is the main objective of venture capital funding for businesses?
Detailed Solution for Test: Business Finance - 2 - Question 9
The main objective of venture capital funding for businesses is to achieve significant returns and a timely exit. Venture capitalists typically invest in high-growth startups with the expectation of substantial returns on their investment within a relatively short period, often around 5 years. This is in contrast to traditional lenders who provide low-cost loans for longer-term stability.
Test: Business Finance - 2 - Question 10
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Which of the following is NOT a source of debt finance for businesses?
Detailed Solution for Test: Business Finance - 2 - Question 10
Equity financing is not a source of debt finance for businesses. The other options listed (bank loans, corporate loans, and public fixed deposits) are examples of debt financing options where businesses borrow money that needs to be repaid with interest. Equity financing, on the other hand, involves selling ownership stakes in the business to investors.
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