Types of Financing

30 original practice MCQs, 2 marks each. Practice and separate-test stems differ. Standalone drills across the chapter, with a separate case-based test pack.

Original practice, not official ICAI questions or suggested answers. Scores are temporary and not synced to Study Hub. Contract/current-rule/accounting/tax boundaries are included in the review pack.

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FM-C02-P001 · 2 marks

A ten-year asset is funded only through unguaranteed three-month rollovers. Main concern?

A. Short loans are always permanently cheaper. B. All renewals are automatic. C. Maturity mismatch and refinancing risk. D. No risk because the asset exists.

Explanation

Correct answer C: Maturity mismatch and refinancing risk.

Asset cash duration and funding maturity must be assessed.

FM-C02-P002 · 2 marks

Which stated source is internal rather than new outside procurement?

A. New bank loan. B. Retained funds actually available for use. C. New debenture cash issue. D. New public equity subscriptions.

Explanation

Correct answer B: Retained funds actually available for use.

Retention can finance activity, but reserves are not automatically liquid cash.

FM-C02-P003 · 2 marks

Equity has no fixed loan coupon in a stated offer. Which inference is wrong?

A. Cash obligations differ from debt. B. Investors require returns for risk. C. Control may be diluted. D. It is economically cost-free.

Explanation

Correct answer D: It is economically cost-free.

No coupon does not remove investor return/opportunity cost.

FM-C02-P004 · 2 marks

Existing 200000 shares, one new for every four, offer price Rs 20. New cash if fully subscribed/no costs?

A. Rs 40 lakh. B. Rs 5 lakh. C. Rs 10 lakh. D. Rs 50 lakh.

Explanation

Correct answer C: Rs 10 lakh.

50000 newx 20=1000000 rupees.

FM-C02-P005 · 2 marks

Founder owns 60000 of 100000 votes;50000 new equal-vote shares go to others. Post-issue percentage?

A. 40%. B. 30%. C. 60%. D. 50%.

Explanation

Correct answer A: 40%.

60000/150000=40%.

FM-C02-P006 · 2 marks

Reserves are capitalised into a bonus issue under supplied lawful terms. What cash is newly raised by that capitalisation alone?

A. All reserves arrive twice. B. Face value is automatically bank cash. C. Bonus shares are cash loans from investors. D. None.

Explanation

Correct answer D: None.

An equity reclassification is not fresh subscription cash.

FM-C02-P007 · 2 marks

Only class C is explicitly cumulative; class N non-cumulative. What should be avoided?

A. Read the actual terms. B. Distinguish creditor claims. C. Check payment/declaration conditions. D. Assuming every preference class carries dividend arrears.

Explanation

Correct answer D: Assuming every preference class carries dividend arrears.

Cumulative rights depend on supplied terms, not all preference labels.

FM-C02-P008 · 2 marks

Rs 5 lakh cumulative preference at 10%, one unpaid year plus current year. Contractual current-plus-arrears amount before legal conditions?

A. Rs 5 lakh. B. Rs 10 lakh. C. Rs 1 lakh. D. Rs 0.5 lakh.

Explanation

Correct answer C: Rs 1 lakh.

5 x 10% x 2=1 lakh; no automatic lawful payment verdict.

FM-C02-P009 · 2 marks

A secured loan has collateral. Which conclusion is unsafe?

A. Default risk still needs assessment. B. Security provides recourse under terms. C. Full timely recovery is guaranteed. D. Collateral value can change.

Explanation

Correct answer C: Full timely recovery is guaranteed.

Security is not absence of default/recovery risk.

FM-C02-P010 · 2 marks

Rs 8 lakh principal converts at Rs 40 per share under stated valid terms. Shares?

A. 20000. B. 32000000. C. 40000. D. 80000.

Explanation

Correct answer A: 20000.

800000/40=20000.

FM-C02-P011 · 2 marks

Sanctioned long-term funds await conditions; temporary loan fills the gap. What source concept fits?

A. Already received long-term cash. B. Bridge finance. C. Permanent donation. D. A bonus issue receipt.

Explanation

Correct answer B: Bridge finance.

Sanction and cash release differ; take-out risks remain.

FM-C02-P012 · 2 marks

A venture investor offers capital plus mentoring. What is correct?

A. Mentoring guarantees success. B. Assess support, control and financial terms without assuming a universal 49% cap. C. All venture money must be interest-free loans. D. All venture stakes legally stop at 49% in every case.

Explanation

Correct answer B: Assess support, control and financial terms without assuming a universal 49% cap.

Historical module figures are not current universal regulation.

FM-C02-P013 · 2 marks

A supplied royalty contract pays 4% of eligible sales Rs 30 lakh. Amount?

A. Rs 0.12 lakh. B. Rs 7.5 lakh. C. Rs 1.2 lakh. D. Zero whenever accounting profit is negative.

Explanation

Correct answer C: Rs 1.2 lakh.

30 x 4%=1.2; base is stated sales.

FM-C02-P014 · 2 marks

A stated venture instrument combines modest interest and sales royalty. Closest module concept?

A. Pure donation. B. Bonus capitalisation. C. Income note. D. Sovereign treasury bill.

Explanation

Correct answer C: Income note.

Hybrid conventional/conditional payment features.

FM-C02-P015 · 2 marks

Loans are pooled via SPV into securities. What follows automatically?

A. Every credit risk vanishes. B. Neither universal risk elimination nor accounting derecognition. C. All loans leave books under every framework. D. Investors cannot lose money.

Explanation

Correct answer B: Neither universal risk elimination nor accounting derecognition.

Structure and applicable criteria must be examined.

FM-C02-P016 · 2 marks

Transfer receipt Rs 80 lakh, fees Rs 2, restricted reserve Rs 6. Unrestricted cash?

A. Rs 72 lakh. B. Rs 74 lakh including reserve as usable. C. Rs 88 lakh. D. Rs 80 lakh.

Explanation

Correct answer A: Rs 72 lakh.

80-2-6=72.

FM-C02-P017 · 2 marks

Short cancellable use, lessor maintenance and residual risk. Economic pattern closest to?

A. A perpetual customer equity subscription. B. AutomaticAS/IndASentry verdict. C. All risks necessarily transferred. D. Operating lease pattern in the supplied description.

Explanation

Correct answer D: Operating lease pattern in the supplied description.

Economic pattern is not a universal accounting determination.

FM-C02-P018 · 2 marks

An owner sells equipment and leases it back. Which statement fits?

A. Cash may be released while use continues, with future lease obligations. B. Continued use proves no cash receipt. C. Sale cash makes rentals free. D. All accounting gains are automatic.

Explanation

Correct answer A: Cash may be released while use continues, with future lease obligations.

Cash release and lease costs are distinct.

FM-C02-P019 · 2 marks

Lessor uses Rs 3 lakh own funds and Rs 12 lakh lender funds for Rs 15 lakh asset. Stated lender share?

A. A mandatory universal 80% legal rule. B. 80%. C. 5%. D. 20%.

Explanation

Correct answer B: 80%.

12/15=80% for this case only.

FM-C02-P020 · 2 marks

Pay Rs 5 lakh atday 30 or Rs 4.9 lakh atday 10. Period cost on early-payment base?

A. About 0.2% for 30 days. B. Zero because no interest is quoted. C. About 2.0408% for 20 days. D. 20% perday.

Explanation

Correct answer C: About 2.0408% for 20 days.

0.1/4.9=2.0408%; not annual yield.

FM-C02-P021 · 2 marks

Customer pays before promised goods are delivered. Correct finance interpretation?

A. Automatically earned unrestricted profit. B. Liquidity with future supply/refund obligations under terms. C. No contractual cost/obligation can exist. D. Permanent grant in every case.

Explanation

Correct answer B: Liquidity with future supply/refund obligations under terms.

Advance terms matter.

FM-C02-P022 · 2 marks

Draw Rs 6 lakh for 30 days at 12%,360 day year; no fees. Interest?

A. Rs 6 lakh. B. Rs 0.06 lakh. C. Rs 0.72 lakh. D. Zero because sanctioned limit is unused above draw.

Explanation

Correct answer B: Rs 0.06 lakh.

6 x 12% x 30/360=.06.

FM-C02-P023 · 2 marks

Face Rs 10 lakh, discount Rs 0.3 lakh, fee Rs 0.05 lakh. Net proceeds?

A. Rs 9.65 lakh. B. Rs 10 lakh. C. Rs 9.7 lakh after ignoring fee. D. Rs 10.35 lakh.

Explanation

Correct answer A: Rs 9.65 lakh.

10-.3-.05=9.65.

FM-C02-P024 · 2 marks

Funding production before export shipment is conceptually?

A. A guaranteed permanent grant. B. Pre-shipment/packing credit. C. Post-shipment receivable finance only. D. Dividend funding.

Explanation

Correct answer B: Pre-shipment/packing credit.

Actual sanction/regulatory terms still need checking.

FM-C02-P025 · 2 marks

Conceptual public-deposit discussion establishes which current permission?

A. None without checking actual applicable current rules. B. Every company can solicit 35% without checks. C. Any public offer is automatically lawful. D. All deposits are equity.

Explanation

Correct answer A: None without checking actual applicable current rules.

Module source lists do not establish eligibility.

FM-C02-P026 · 2 marks

Receive Rs 6 lakh now, repay Rs 9 lakh at maturity, no coupon. Nominal rupee funding cost?

A. Rs 3 lakh before other costs/tax. B. A guaranteed 50% annualyield. C. Rs 15 lakh. D. Zero.

Explanation

Correct answer A: Rs 3 lakh before other costs/tax.

9-6=3; horizon matters for annual cost.

FM-C02-P027 · 2 marks

Benchmark 7% plus 2 percentage points on Rs 20 lakh. Annualised interest?

A. Rs 1.8 lakh. B. Rs 14 lakh. C. Rs 0.4 lakh. D. Rs 1.4 lakh.

Explanation

Correct answer A: Rs 1.8 lakh.

20 x 9%=1.8; supplied interest benchmark not FX.

FM-C02-P028 · 2 marks

25000 receipts each represent 4 shares. Underlying count?

A. 6250 shares. B. 25000 shares necessarily newly issued. C. A debt principal of 100000 rupees. D. 100000 shares.

Explanation

Correct answer D: 100000 shares.

25000 x 4; representation is not automatic fresh issue.

FM-C02-P029 · 2 marks

General-use bond changes terms on specified sustainability KPIs. Closest supplied structure?

A. ESG label guarantees all outcomes. B. No performance terms exist. C. Every rupee must finance green projects by that fact alone. D. Sustainability-linked rather than automatically project-restricted green proceeds.

Explanation

Correct answer D: Sustainability-linked rather than automatically project-restricted green proceeds.

Targets/verification/contract terms matter.

FM-C02-P030 · 2 marks

An online offer gives no ownership/debt return and contributions are voluntary charity. Stated form?

A. Equity regardless of terms. B. Universal automatic securities permission. C. Interest-bearingP 2 Ploan. D. Donation-based crowdfunding.

Explanation

Correct answer D: Donation-based crowdfunding.

Separate donation, equity and debt, and actual rules.