Commercial Bill - k-12 - 1-10

Q1:
Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Money market instruments
Concept Field: Commercial bill
Commercial bills are used to fulfil ___________.

A. Long-term requirement of funds
B. Secondary requirement of funds
C. Working capital requirement of funds
D. All of the above
Solution: C
Explanation- Commercial bills are bills of exchange which are issued by seller to their
customers while selling goods on credit. This instruments is used for working capital
requirement of funds.
Q2:

Difficulty: Easy
Who is the drawer of the commercial bill?

A. Buyer
B. Seller
C. Government
D. Commercial banks
Solution: B
Explanation- Commercial bill are short-term debt instruments which are issued for providing
working capital to the various business owner who purchase goods and services of credit. The
seller is the drawer of commercial bills.
Q3:

Difficulty: Medium
When bills of excahnge is accepted then it becomes marketable securities and it is known as
_______.
A. Commercial bill
B. Trade bill
C. Commercial paper
D. None of the above
Solution: B
Explanation- Commercial bills on being accepted become the marketable securities.
Marketable securities are easily traded in the money market due to which commercial bills
are known as trade bills.
.
Q4:

Difficulty: Medium
Determine the place where commercial bills can be sold if seller want funds before maturity
date.
A. Money market
B. Secondary market
C. Primary market
Solution: A
Explanation- Commercial bills are the short-term bills of exchange which are drawn by
sellers to the buyers while selling goods on credit for the definite maturity period. These bills
are traded in the money market.
Q5:
Question Type: Conceptual

Difficulty: Hard
Assertion (A): Commercial bills are accepted by the buyers when goods are bought on credit.
Reason (R): Commercial bills are drawn by the seller who has sold the goods on credit.
Choose the correct answer from the following code:
A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: B
Explanation- Commercial bills are accepted by the buyers when goods are bought on credit.
Commercial bills are drawn by the seller who has sold the goods on credit.
Q6:

Difficulty: Medium
Identify the incorrect statement.
Codes:
I. Commercial bills are bill of exchange.
II. Commercial bills are issued with fixed maturity date.
III. Commercial bill which are accepted in the money market are also known as trade
bills.
IV. Commercial bills are self liquidating instruments.
Options:
A. Only statement II is incorrect
B. Statement I and III are incorrect
C. Statement I and IV are incorrect
D. None of the statements are incorrect
Solution: D
Explanation- Commercial bills are short-term debt instrument which are negotiable, self
liquidating, and issued with fixed maturity period. Commercial bill which are accepted in the
money market are also known as trade bills.
Q7:

Difficulty: Easy
Who is the drawee of the commercial bill?

A. Buyer
B. Seller
C. Government
D. Commercial banks
Solution: A
Explanation- Commercial bill are short-term debt instruments which are issued for providing
working capital to the various business owner who purchase goods and services of credit. The
buyer is the drawee of commercial bills.
Q8:

Difficulty: Medium
Trade bills are sold to the commercial banks at _______.
Options:
A. par
B. premium
C. discount
Solution: C
Explanation- Trade bills are bills of exchange when they become saleable in the money
market. They can be sold to commercial banks at discount by the seller if they wand funds
before maturity date.
Q9:
Difficulty: Medium
Commercial bills can be defined as ________.

A. Unaccepted trade bills
B. Trade bills accepted by banks
C. Bills of exchange accepted in the market
Solution: B
Explanation- Commercial bills are the trade bills accepted by commercial banks. When
seller requires funds earlier than the maturity then they are sold to the commercial banks
which when accepted are called as commercial bills.
Q10:

Difficulty: Medium
Assertion (A): Commercial bill are generally sold to the commercial banks at discount.
Reason (R): Yield on commercial bills is the actual value or par value and the discounted
rates at which they are bought by the commercial banks.
Choose the correct answer from the following code:
A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: B
Explanation- Commercial bill are generally sold at discount to the commercial banks. Yield
on commercial bills is the actual value or par value and the discounted rates at which they are
bought by the commercial banks.

Commercial Bill - k-12 - 1-10

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Q1:

Question Type: Concept

Commercial bills are used to fulfil ___________.

Question Type: Concept

Who is the drawer of the commercial bill?

Question Type: Concept

Question Type: Concept

Question Type: Conceptual

Question Type: Concept

Identify the incorrect statement.

Question Type: Concept

Who is the drawee of the commercial bill?

Question Type: Concept

Trade bills are sold to the commercial banks at _______.

Commercial bills can be defined as ________.

Question Type: Conceptual

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