Finance and Management Questions For RBI Grade B Phase II 2023 | Set-20

Correct Answers: D. Both A and C

Explanation- ADVANTAGES OF HIRE PURCHASE
• Immediate use of assets without paying the entire amount.
• Expensive assets can be utilized as the payment is spread over a period of time.
• Fixed rental payments make budgeting easier as all the expenditures are known in advance.
• Easy accessibility as it is a secured financing.
• No need to worry about the asset depreciating quickly in value as there is no obligation to buy the asset.

DISADVANTAGES OF HIRE PURCHASE
Hire Purchase suffers from the following disadvantages:
• Total amount paid towards the asset will be higher than the cost of the asset.
• The long duration of the rental payments.
• Ownership only at the end of the agreement. The hirer cannot modify the asset till then.
• The addition of any covenants increases the cost.
• If the hired asset is no longer needed because of any change in the business strategy, there may be a resulting penalty.

HIRE PURCHASE IS BEST SUITABLE FOR
Small scale companies and entrepreneurs can benefit from Hire Purchase. Expensive and important assets can be hired and later owned. This ensures that they can start using the asset from very first day and use the money earned to later buy the same assets.

Correct Answers: C. Capital reserve arising due to revaluation

Explanation- Bonus issue shall be given rise to out of free reserves created out of the profits or securities premium received in cash only and reserves created by revaluation of fixed assets cannot be capitalised for the purpose of issuing bonus shares.

Correct Answers: B. Increase

Explanation- CRR is the amount of funds that all scheduled commercial banks and excluding regional rural banks are required to take care of with none floor for ceiling rate with the RBI with regard to their total demand and time liabilities to make sure liquidity and solvency of banks.

Correct Answers: C. By Companies for Short Term

Explanation- Commercial paper is a commonly used type of unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities. Maturities on commercial paper typically last several days, and rarely range longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates.

Correct Answers: E. Purchase of Machinery

Explanation- Cash Flow of a Company is divided into three sections – cash flow from operating activities, cash flow from Investing and cash flow from financing activities. Cash flow from operating activities (CFO) is an accounting item that indicates the amount of money a company brings in from the ongoing regular business activities, such as manufacturing and selling goods or providing a service. Cash flow from operating activities does not include long-term capital expenditures or investment costs, as they may be one time activities. CFO focuses only on the core business and is also known as operating cash flow (OCF) or net cash from operating activities. So, the investment in Purchase of Machinery is part of Investing Activities (Long term capital Expenditure).

Correct Answers: B. Authority

Explanation- A senior manager inherits the authority, as per general rule in the organization to give instructions to its subordinates. Sometimes managers acquire the authority to give instructions due to delegation or decentralisation.

Correct Answers: B. Hygiene factors

Explanation- The two-factor theory states that there are certain factors within the workplace that cause job satisfaction while a separate set of things cause dissatisfaction, all of which act independently of every other. It was developed by psychologist Frederick Herzberg.

Correct Answers: C. 360-degree feedback

Explanation- A 360-degree feedback or multi-rater feedback is a process of gathering an employee’s performance review from multiple sources like seniors, subordinates, customers etc. i.e. reviews of an employee from everyone he had contact with. This is the reason why it is called a 360-degree feedback system.

Correct Answers: B. Monetary

Explanation- Resource Allocator Role of Manager, The most important resource thata manager allocates to his subordinatesis his time. As a resource allocator, managers are responsible for allocating human, physical and monetary resources. Accordingly, setting up of atime schedule for the completion of anoperation or approval of expenditure ona particular project, etc., are the functionswhich the managers perform in the roleof a resource allocator.

Correct Answers: A. Sigmund Freud

Explanation- The Psychoanalytic Theory of personality is the most popular theory formulated by Sigmund Freud. It refers to human personality is comprised of these closely integrated functions.