Interview Questions.

Question 1. What Are Methods Of Borrowings?

Answer :

It added the idea of operating capital hole which the extra of present day property over modern liabilities aside from bank borrowing. They additionally recommended three innovative methods to determine the most limits according to which banks have to provide the finance.

Question 2. What Is Style Of Lending?

Answer :

Is advised that the coins credit score limit ought to be bifurcated into  components i.E. Minimum stage of borrowing required at some stage in the year need to be financed with the aid of manner of a term mortgage and the call for coins credit to take take care of fluctuating requirements.   

Financial Accounting Interview Questions
Question three. What Are Credit Information Systems?

Answer :

Credit Information Systems : The committee recommended the submission of a quarterly reporting system based totally on real ass properly as estimations, in order that the necessities of operating capital may be estimated on the premise of production wishes.  

Question four. Do You Know Follow Up, Supervision And Control?

Answer :

The committee counseled that there must be a right device of supervision and control. 

Question five. Explain Norms For Capital Structure?

Answer :

The committee did now not propose any right norm for debt fairness ratio, the committee opined that if the trend of debt equity ratio is worse than the medians, the banker ought to convince the debtors to reinforce the fairness base as early as viable.              

Auditing Interview Questions
Question 6. Explain What Recommendations Of Tandon Committee Were Accepted By Rbi According To Its Notification On 21st Aug 1975?

Answer :

According to the notification of RBI dated on twenty first Aug 1975 general the subsequent suggestions of Tandon committee:

Norms for Inventories and Receivables
Coverage
Methods of Borrowing
Style of Credit
Information System
Question 7. What Is Hypothecation?

Answer :

Hypothecation is a style of protection in which bank extends the help to the employer against the security of movable assets. Neither the property nor the ownership of the products hypothecated is transferred to the financial institution. If the employer fails to pay off the amount of help, in such case the financial institution has the right to sell the products hypothecated to realise the remarkable quantity of assistance granted through it to the agency. A patron getting into a loan agreement is an example of Hypothecation.

Management Accounting Interview Questions
Question 8. What Is Pledge?

Answer :

Pledge is a mode of protection in which financial institution extends the help to the business enterprise against the safety of movable belongings. But the ownership of the goods is with the financial institution and the goods pledged are inside the custody of the financial institution. Thus, it becomes the duty of the financial institution to take care of the products in the custody. In case the agency is unable to repay the quantity of assistance, the financial institution has the proper to promote the products pledged to recognize the wonderful amount.

Question 9. What Is Lien?

Answer :

Lien is a mode of protection wherein the bank retains the products belonging to the organisation until the debt due to the financial institution is paid. Lien is of two types: Particular Lien and General Lien. Normally, Bank enjoys wellknown Lien.

Capital Market Interview Questions
Question 10. What Is Mortgage?

Answer :

Mortgage is a style of protection wherein the prison interest in a particular immovable belongings is transferred as protection for the price of debt. The birthday party who transfers the hobby is referred to as mortgager and celebration in whose favour the interest is so transferred is known as mortgagee. The borrower possesses the belongings while the bank gets complete prison identify, problem to borrower’s right, to pay off to debt.          

Question 11. Tell Me What Were The Main Issues Studied By Tandon Committee To Exercise Control Over Working Capital?

Answer :

 The commentary and recommendations made by way of Tandon committee had been:

Norms : The committee advised 15 industries except for engineering industries. These norms were counseled in following forms:
a. For Raw materials: Consumption in months
b. For Work in Progress: Cost of production in months
c. For Finished Goods: Cost of Sales in months
d. For Receivables: Sales in months
Methods of Borrowings : It introduced the idea of operating capital gap which the excess of present day belongings over contemporary liabilities apart from financial institution borrowing. They additionally recommended 3 progressive techniques to decide the most limits in step with which banks must provide the finance.
Style of Lending : Is cautioned that the coins credit restriction have to be bifurcated into  additives i.E. Minimum degree of borrowing required throughout the year have to be financed by manner of a time period loan and the call for cash credit score to take care for fluctuating necessities.
Credit Information Systems : The committee advocated the submission of a quarterly reporting device based totally on actual ass properly as estimations, so that the necessities of working capital can be predicted on the premise of production needs.
Follow up, Supervision and Control : The committee recommended that there should be a right device of supervision and manipulate.
Norms for Capital Structure: The committee did no longer advise any right norm for debt equity ratio, the committee opined that if the trend of debt equity ratio is worse than the medians, the banker need to convince the debtors to strengthen the fairness base as early as feasible.
 

 

 

 

 

 

 

 

Budget and Planning Interview Questions
Question 12. Explain What Forms Of Security Does A Bank Need To Provide Security To A Company?

Answer :

A financial institution desires following styles of safety to provide protection to a business enterprise:

Hypothecation
Pledge
Lien
Mortgage
Hypothecation is a mode of protection in which financial institution extends the assistance to the agency towards the security of movable assets. Neither the property nor the ownership of the products hypothecated is transferred to the financial institution. If the employer fails to repay the quantity of assistance, in such case the bank has the right to promote the products hypothecated to understand the fantastic amount of help granted via it to the enterprise. A purchaser entering into a mortgage agreement is an example of Hypothecation.
Pledge is a style of security in which bank extends the help to the agency towards the safety of movable belongings. But the ownership of the goods is with the financial institution and the products pledged are inside the custody of the financial institution. Thus, it turns into the duty of the financial institution to take care of the goods in the custody. In case the enterprise is unable to pay off the amount of help, the bank has the proper to promote the goods pledged to recognise the exquisite quantity.
Lien is a style of protection wherein the bank retains the products belonging to the corporation till the debt because of the bank is paid. Lien is of two types: Particular Lien and General Lien. Normally, Bank enjoys general Lien.
D) Mortgage is a style of security in which the prison hobby in a particular immovable assets is transferred as safety for the price of debt. The celebration who transfers the hobby is called mortgager and birthday celebration in whose favour the hobby is so transferred is called mortgagee. The borrower possesses the assets even as the financial institution receives full felony identify, subject to borrower’s proper, to pay off to debt.    
Financial Accounting Interview Questions
Question 13. Explain What Were The Main Issues Studied By Tandon Committee To Exercise Control Over Working Capital?

Answer :

The principal troubles studied through Tandon committee to workout control over working capital have been:

Can the norms be advanced for modern property and for debt fairness ratio to make certain minimum dependence on financial institution finance?
How the quantum of financial institution advances may be decided?
Can the existing way and style of lending be progressed?
Can an ok planning, assessment and information machine by way of advanced to ensure a disciplined glide of credit to satisfy proper manufacturing needs and its right supervision?
Question 14. Explain The Advantages Of A Lc To An Importer?

Answer :

Advantages of Letter of Credit to an Importer:

Importer is guaranteed to acquire timely shipping of products.
It makes structuring an effective charge agenda easy.
Expediting customs clearance and remaining delivery because the files are obtained speedy.
It offers an assurance to the importer that the fee will best be made to the exporter upon presentation of documents evidencing the shipment of goods.
It reduces the danger of non-performance of the exporter.
Question 15. Explain What Is Fund Based Lending? What Are The Various Forms In Which Fund Based Lending May Be Made By Banks?

Answer :

Fund primarily based lending, where the lending financial institution commits the bodily outflow of budget. The various bureaucracy in which fund based totally lending may be made via banks:

Loan
Overdraft
Cash Credit
Bills Purchased/Discounted
Working Capital Term Loans
Packing Credit
Budgetary Control Interview Questions
Question sixteen. What Are The Different Types Of Lc?

Answer :

Different varieties of Letter of Credit:

Revocable Letter of Credit
Irrevocable Letter of Credit
Confirmed Irrevocable Letter of Credit
Transferable Letter of Credit
Revolving Letter of Credit
Credit available by way of installments
Back to Back Letter of Credit
Anticipatory Credit or Red Clause
Green Clause Letter of Credit
Deferred Payment Letter of Credit
Standby Letter of Credit
Question 17. Explain What Are The Advantages Of A Lc To An Exporter?

Answer :

Advantages of Letter of Credit to an Exporter:

Exporter is guaranteed fee upon presentation of specified documents.
It gets rid of the hazard of dealing with an unknown importer in a extraordinary usa.
It turns into less difficult for the exporter to secure pre order financing.
Importer cannot refuse payment by using raising a grievance about the products.
Capital structure Interview Questions
Question 18. Tell Me What Are Bank Guarantees? How Do They Work?

Answer :

Bank Guarantee is a non fund based totally lending given by means of the financial institution to ensure that the liabilities of a debtor will be met. This facility enables the patron to acquire items, purchase device and thereby enlarge enterprise interest. This technique can be defined with the assist of an example. Suppose X and Y are two corporations each unknown to every other, wherein X desires to purchase a few fabric from Y Company. As the enterprise Y does not know the employer X and is involved whether or not corporation Y will make the fee or not.
Bank Z of Company X opens the bank guarantee in favour of corporation Y Bank Z wherein it undertakes to make the price to Company Y, if the business enterprise fails to make price to agency Y. In this way, pursuits of business enterprise Y are protected as it's far assured to get the payment both from business enterprise X or from its Bank Z. As such, it turns into non fund based lending for Bank Z as it does no longer commit any outflow of price range. Bank Guarantee transactions might be applicable in case of credit transactions.

Auditing Interview Questions
Question 19. What Are The Different Parties Involved In A Lc?

Answer :

Following are the parties involved in a letter of credit score :

Importer
Issuing Bank, Bank of Importer
Advising Bank, that's in Exporter’s country, which notifies the exporter about establishing of letter of credit score.
Confirming Bank, confirms the letter of credit score in case the exporter is not satisfied approximately the safety presented with the aid of the importer.
Exporter, who's the beneficiary
Negotiating Bank, whom the exporter submits the documents.
Question 20. What Is Letter Of Credit (lc)?

Answer :

Letter of Credit is a non fund primarily based lending which may be very frequently located in global change. This facility is given whilst the exporter and importer are unknown to each other. In this example, the importer applies to his bank (Issuing Bank) in his united states of america to open a letter of credit in favour of exporter wherein the importers’ bank undertakes to pay the exporter on fulfilling the phrases and situations designated in the letter of credit.

Capitalization Interview Questions
Question 21. Explain What Is Non-fund Based Lending?

Answer :

Non fund primarily based lending, in which the lending bank does not dedicate any bodily outflow of funds. The funds position of the lending bank remains intact. The non-investment based totally lending can be maid in  forms:

Bank Guarantees
Letter of Credit
Question 22. What Are The Advantages Of Commercial Papers?

Answer :

Advantages of industrial papers:

It is short and fee effective manner of elevating operating capital.
Best manner to the enterprise to take the gain of short term interest fluctuations in the market
It provides the go out option to the buyers to give up the funding.
They are cheaper than a financial institution mortgage.
As commercial papers are required to be rated, true score reduces the value of capital for the business enterprise.
It is unsecured and as a result does now not create any liens on property of the company.
It has a huge variety of adulthood
It is exempt from federal SEC and State securities registration requirements.
Question 23. What Are The Disadvantages Of Commercial Papers?

Answer :

Disadvantages of business papers:

It is available simplest to a few selected blue chip and profitable groups.
By issuing industrial paper, the credit score available from the banks may also get decreased.
Issue of commercial paper could be very carefully regulated by using the RBI guidelines.
Balance sheet Interview Questions
Question 24. Tell Me How Is The Amount Of Assistance That A Bank Can Provide For Your Working Capital Calculated?

Answer :

Working capital assistance is furnished by means of the financial institution with the intention to bridge the space between cutting-edge belongings and contemporary liabilities, which can be fund based and non-fund based totally. In order to reap credit from financial institution for meeting running capital requirements, the corporation want to estimate its working capital necessities and is needed to approach the financial institution alongside the important supporting files. On the premise of the files, the financial institution will determine the quantity of help which can be given to the organisation after considering the margin necessities.
This margin money affords the cushion in opposition to the reduction in the price of the safety. If the organisation fails to satisfy its responsibilities then the financial institution may realize the security for recovering dues from the agency. The percent of margin cash depends upon the credit status of the organisation, fluctuations within the charge of safety or the directives of Reserve bank of India.

Management Accounting Interview Questions
Question 25. Explain What Is The Nature Of A Commercial Paper?

Answer :

It can be issued for the adulthood duration of seven days to one 12 months.
It has the denomination of Rs. 5 lakhs and every unmarried investor have to make investments minimum Rs. Five lakh in the industrial paper.
Every difficulty such as the renewal might be considered to be the clean trouble.
The quantity shall be within the common limit sanctioned by means of the Board of Directors.
Question 26. Explain What Is The Process For Issuing Commercial Papers?

Answer :

Every organization issuing the CP must hire a scheduled bank because the issuing and paying agent. The authorized authority is needed to fulfill itself about the quality credit score rating. A resolution is required to be handed through the Board of Directors approving the difficulty and authorizing the respectable to execute the applicable files, as in keeping with RBI norms.
It have to also confirm the documents submitted with the aid of the issuing organization and difficulty a certificate that the files are in order. The provider ought to divulge to its potential buyers its monetary role. The trouble needs to be completed within  weeks of opening.

Accounting Principles Interview Questions
Question 27. Explain Which Credit Rating Agencies Are Authorized By Rbi To Provide A Credit Rating For Commercial Papers?

Answer :

Following Credit rating companies are authorized by way of RBI to offer a credit score for Commercial Papers:

CRISIL (Credit Rating Information Services of India Ltd.)
ICRA (Investment Information and Credit Rating Agency of India Ltd.)
CARE (Credit Analysis and Research Ltd.)
FITCH Rating India Ltd.
Capital Market Interview Questions
Question 28. Tell Me Who Can Invest In Commercial Papers?

Answer :

Following people can invest in business papers:

1. Individuals
2. Banks
three. Corporate Bodies incorporated in India
4. Unincorporated Bodies
five. Non resident Indians
6. Foreign Institutional Investors

Question 29. Explain What Are Commercial Papers? Who Can Issue Commercial Papers?

Answer :

Commercial papers are an unsecured promissory observe issued at a discount with a hard and fast adulthood of one-270 days. The price of cut price is decided by way of the company and is not regulated. It includes better hobby compensation quotes than bonds. It is basically cash marketplace securities issued through big banks and agency to get cash to meet quick term debt duties and are subsidized by using employer’s promise to pay face fee on the maturity date of the economic be aware.

It is of constant adulthood. Firms with incredible credit score rating from a diagnosed rating employer may be able to promote their business paper at an affordable fee. A corporation can problem the Commercial Paper furnished:

The minimal tangible internet worth of the enterprise must no longer be less than Rs.40mn as in line with the modern audited balance sheet.
Company has been sanctioned running capital limits via banks or Financial Institutions.
Borrowed amount of the agency is classed as a trendy asset by using the financial institution.
The corporation have to have minimum credit score rating from an enterprise accepted by RBI.
Corporate Finance Interview Questions
Question 30. What Is Working Capital Cycle?

Answer :

The operating capital cycle measures the quantity of time that elapses between the moment while the organisation commences its enterprise with a positive sum of money, and the moment whilst the corporation receives charge for its items or offerings. Thus, on this cycle cash to be had to the business enterprise is transformed returned inside the form of coins. Good running capital cycle balances incoming and outgoing bills to maximise running capital. A short working capital offers an idea to the agency that the business has exact cash go with the flow.

Question 31. Do You Know What Are The Sources Used For Financing Temporary Requirement Of Working Capital?

Answer :

The sources used for financing temporary requirement of running capital are:

Spontaneous Sources
Trade Credit
Outstanding Expenses
Inter Corporate Deposits
Commercial Papers
Banks
Advances obtained form clients
Various quick time period provisions
Fixed deposits for a duration of one 12 months or less
Question 32. What Is Variable Working Capital?

Answer :

Variable working capital is that portion of the total capital that is required over and above the fixed working capital. This working capital is required to meet the seasonal needs and a few contingencies. The requirement of this kind of working capital changes with the adjustments within the stage of activity.

Capital Gains Tax Interview Questions
Question 33. What Is Fixed Working Capital?

Answer :

Fixed running capital is that portion of the entire capital that is required to be maintained in the business on the everlasting basis or uninterrupted foundation. This working capital is needed to invest in fixed property. The requirement of this type of working capital is unaffected because of the adjustments in the stage of activity.

Budget and Planning Interview Questions
Question 34. Do You Know What Current Liabilities Can Be Used As Spontaneous Sources For Financing The Working Capital?

Answer :

Following cutting-edge liabilities can be used as spontaneous source of financing the working capital:

Trade Credit
Outstanding Expenses
Trade credit score is an association wherein a organization purchase items or offerings with out making instantaneous cash price. If a organization buys uncooked materials from the suppliers on credit basis, it receives the raw fabric for utilization straight away with the ability to make the payment on the not on time time. By accepting the delayed payment, the providers of uncooked material finance the requirement of working capital. It is an essential detail of capitalization in an running enterprise because it can reduce the capital funding required to perform the commercial enterprise if it's far managed well.

Outstanding charges are the expenses that are unpaid on the give up of the accounting period, which means that they may be payable however no longer yet paid. This might also practice to salaries, wages, telephone expenses, electricity expenses, water fees and many others. All the first rate costs come below nominal debts and need to be credited.

Question 35. Explain What Factors Affect Working Capital Requirement?

Answer :

Factors affecting working capital requirement:

Nature of commercial enterprise
Size of the organisation
Phase of change cycles
Production regulations
Turnover of inventories
Dividend Policies
Trading terms
Length of manufacturing cycle
Profitability
Seasonal Variations.
Question 36. What Is Outstanding Expenses?

Answer :

Outstanding fees are the expenses that are unpaid on the quit of the accounting period, because of this they're payable but no longer but paid. This can also observe to salaries, wages, cellphone expenses, strength fees, water costs and so forth. All the excellent costs come underneath nominal accounts and ought to be credited.

Budgetary Control Interview Questions
Question 37. What Is Trade Credit?

Answer :

Trade credit is an association in which a organisation buy items or offerings with out making immediate cash payment. If a corporation buys raw materials from the providers on credit basis, it gets the raw material for utilization straight away with the power to make the price on the behind schedule time. By accepting the not on time price, the providers of uncooked cloth finance the requirement of operating capital. It is an crucial detail of capitalization in an operating enterprise because it can lessen the capital investment required to operate the enterprise if it is managed well.

Question 38. What Is The Primary Objective Of Working Capital Management?

Answer :

The primary goal of working capital control is to avoid over investment or below funding in present day assets, as a very huge amount of funds are blocked in modern assets in realistic occasions. Management of operating capital guarantees that sufficient cash is available to fulfill day to day cash necessities. Maximization of earnings is any other number one goal of running capital control.

The control of operating capital involves dealing with inventories, bills receivable and payable, and cash. In different phrases, the purpose of operating capital management is to make certain that a company is capable of maintain its operations and that it has enough potential to meet both maturing short-term debt and upcoming operational charges.

Question 39. What Is Working Capital?

Answer :

Working capital represents the working liquidity available to a commercial enterprise company. Working capital may suggest Gross Working Capital or Net Working Capital. Gross Working Capital is same to Current Assets and Net Working Capital is equal to Current Assets much less Current Liabilities.

Question forty. Do You Know Spontaneous Source Of Financing Variable Working Capital?

Answer :

Spontaneous source of financing variable working arises within the normal course of commercial enterprise operations. It is also referred to as modern-day liabilities. This supply of financing is unsecured in nature and varies with the level of sales. They do no longer have any explicit fee attached to the identical.

Capital shape Interview Questions
Question 41. Tell Me What Are Inter-company Deposits (icds)? What Are Their Main Characteristic Features?

Answer :

Inter Corporate Deposits shows unsecured short term funding raised by one organization from any other enterprise. They are dependent on private contacts. Following are their principal characteristics:

They are for a totally short period of time i.E 3 months or 6 months.
They are unsecured supply for raising finances.
They are not regulated via any law.
It is a courting based borrowing made by using the company.
They involve high chance and high returns
Useful in fixing temporary capital disaster.