A Business Education- Finance Test Quiz!

1. High loan capital means the business is likely to suffer during times of rising interest rates.

True

False

High loan capital refers to a significant amount of debt that a business has taken on. When interest rates rise, the cost of borrowing money increases, which means that the business will have to pay more in interest payments on its loans. This can put a strain on the business's finances and make it more difficult for them to meet their loan obligations. Therefore, it is likely that a business with high loan capital will suffer during times of rising interest rates.

Explanation

High loan capital refers to a significant amount of debt that a business has taken on. When interest rates rise, the cost of borrowing money increases, which means that the business will have to pay more in interest payments on its loans. This can put a strain on the business's finances and make it more difficult for them to meet their loan obligations. Therefore, it is likely that a business with high loan capital will suffer during times of rising interest rates.

2. How can you build a good credit history?

Buy as much as you can on your credit card each month.

Open a checking and savings account.

Pay your bills on time consistently.

Get as many credit cards as you can.

Paying your bills on time consistently is the best way to build a good credit history. Timely payments demonstrate financial responsibility and reliability, which are important factors considered by credit bureaus when determining your creditworthiness. It shows that you are capable of managing your finances and meeting your financial obligations. By consistently paying your bills on time, you establish a positive payment history, which can lead to a higher credit score and better credit opportunities in the future.

Explanation

Paying your bills on time consistently is the best way to build a good credit history. Timely payments demonstrate financial responsibility and reliability, which are important factors considered by credit bureaus when determining your creditworthiness. It shows that you are capable of managing your finances and meeting your financial obligations. By consistently paying your bills on time, you establish a positive payment history, which can lead to a higher credit score and better credit opportunities in the future.

3. Initial public offering is not a source of finance for an ordinary partnership.

True

False

An initial public offering (IPO) is the process by which a company offers its shares to the public for the first time. However, this is not applicable to ordinary partnerships as they are not separate legal entities. Unlike corporations, partnerships do not have shares that can be traded on the stock market, and therefore an IPO is not a source of finance for them. Instead, partnerships rely on the contributions of their partners and other forms of financing such as loans or investments. Therefore, the statement that an IPO is not a source of finance for an ordinary partnership is true.

Explanation

An initial public offering (IPO) is the process by which a company offers its shares to the public for the first time. However, this is not applicable to ordinary partnerships as they are not separate legal entities. Unlike corporations, partnerships do not have shares that can be traded on the stock market, and therefore an IPO is not a source of finance for them. Instead, partnerships rely on the contributions of their partners and other forms of financing such as loans or investments. Therefore, the statement that an IPO is not a source of finance for an ordinary partnership is true.

4. What is credit limit?

It is the amount spent each month on your credit card.

It is the total amount of credit issued to the user determined by the credit card company.

The limit that the credit card user allows themselves to spend.

The limit of places that take credit cards.

The credit limit refers to the total amount of credit that is provided to the user by the credit card company. This limit is determined by the credit card company based on factors such as the user's creditworthiness, income, and credit history. It represents the maximum amount of money that the user is allowed to borrow on their credit card.

Explanation

The credit limit refers to the total amount of credit that is provided to the user by the credit card company. This limit is determined by the credit card company based on factors such as the user's creditworthiness, income, and credit history. It represents the maximum amount of money that the user is allowed to borrow on their credit card.

5. What should you do if you're having trouble paying your credit card bills?

Use another card to pay them off.

Work with your creditors to determine how to best repay your obligations.

Borrow money from family or friends.

All of the above.

If you're having trouble paying your credit card bills, the best course of action is to work with your creditors to determine how to best repay your obligations. This involves communicating with your creditors to discuss potential payment plans, negotiating lower interest rates or fees, or exploring options like debt consolidation. Using another card to pay off your bills or borrowing money from family or friends may provide temporary relief, but it does not address the underlying issue and can potentially lead to more financial difficulties in the long run.

Explanation

If you're having trouble paying your credit card bills, the best course of action is to work with your creditors to determine how to best repay your obligations. This involves communicating with your creditors to discuss potential payment plans, negotiating lower interest rates or fees, or exploring options like debt consolidation. Using another card to pay off your bills or borrowing money from family or friends may provide temporary relief, but it does not address the underlying issue and can potentially lead to more financial difficulties in the long run.

6. If interest rates in an economy increase, dividend payments to shareholders will also have to increase.

True

False

An increase in interest rates does not necessarily require an increase in dividend payments to shareholders. Dividend payments are determined by the profitability and financial health of a company, not by interest rates. While higher interest rates may affect a company's borrowing costs and overall financial performance, they do not directly impact dividend payments. Therefore, the statement is false.

Explanation

An increase in interest rates does not necessarily require an increase in dividend payments to shareholders. Dividend payments are determined by the profitability and financial health of a company, not by interest rates. While higher interest rates may affect a company's borrowing costs and overall financial performance, they do not directly impact dividend payments. Therefore, the statement is false.

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