MFS Module 4 - Quiz on Fund Based Financial Services

What is factoring primarily used for?

• To pay off debts

• To finance receivables

• To purchase real estate

• To invest in stocks

Which of the following is NOT a function of a factor?

• Providing insurance

• Maintenance of accounts

• Collection of debts

• Financing trade debts

What is the main difference between recourse and non-recourse factoring?

• Non-recourse allows for debt recovery from the client

• Recourse is more expensive

• Non-recourse is faster

• Recourse allows for debt recovery from the client

In advance factoring, what percentage of the receivables is typically paid in advance?

• 75% to 90%

• 100%

• 30% to 40%

• 50% to 60%

What is the primary purpose of forfaiting?

• To purchase inventory

• To finance domestic trade

• To finance receivables in international trade

• To provide loans to individuals

Which of the following is a feature of forfaiting?

• Is a short-term financing

• Includes ledger administration

• Involves a series of promissory notes

• Requires collateral

What is a key advantage of factoring?

• Requires collateral

• High interest rates

• Time savings in collections

• Long-term commitment

What is the main characteristic of an operating lease?

• Ownership transfers to the lessee

• Requires a large down payment

• Is a long-term agreement

• Lessor retains ownership

Which of the following is a disadvantage of leasing?

• Ownership of the asset

• Complex documentation process

• Immediate tax benefits

• High initial capital investment

In a hire purchase agreement, when does ownership transfer to the buyer?

• At the start of the agreement

• After the first payment

• After all payments are made

• At the end of the lease term