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Chapter: Business Science : Merchant Banking and Financial Services : Other Fund Based Financial Services

Short Answers: Fund Based Financial Services

Business Science - Merchant Banking and Financial Services - Other Fund Based Financial Services

1.  Define venture capital.


Venture capital is defined as providing seed, start up and first stage financing and also funding expansion of companies that have already demonstrated their business potential but do not yet have access to the public securities market or to credit -oriented institutional funding sources.


2.  What is last stage financing?


This stage of venture capital financing involves established businesses which require additional financial support. At this stage, the firm is not ripe enough to go for a public offer as it has not reached the profit -earning stage.


3.     Mention any two venture capital industry of India.


Two venture capital industry of India are


(i)    Risk Capital and Technology Finance Corporation Limited.


(ii) Technology Development and Information Company of India Limited (TDICI).


4.      What is foreign venture capital?


Foreign Venture Capital Investors (FVCIs) are those funds that are not constituted in India but make investments in Indian capital market.


5.  Define bill of exchange.


According to the Indian Negotiable Instr an instrument in writing containing an unconditional order, signed by the maker, directing a


certain person to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of that instrument.‖


6.  Write a note on consumer credit.


Consumer credit includes all asset-based financing plans offered to primarily individuals to acquire durable consumer goods. Typically, in a consumer credit transaction the individual-consumer-buyer pays a fraction of the cash purchase price at the time of the delivery of the asset and pays the balance with interest over a specified period of time.


7.  What   is   the   meaning   of   „factoring‟?


―Factoring means an arrangement between least two of the following service to be provided by the factor:


(i)                Finance,


(ii)             Maintenance of accounts,


(iii)           Collection of debts and


(iv)           Protection   against   credit   risk‖.


8.    What   is   the   meaning   of   „Forfeiting‟?


Forfeiting is a form of financing of receivables pertaining to international trade. It denotes the purchase of trade bills/promissory notes by a bank/financial institution without recourse to the seller. The purchase is in the form of discounting the documents covering the entire risk of non -payment in collection.


9.  What do you mean by real estate financing?


A set of all financial arrangements that are made available by housing finance institutions to meet the requirements of housing is called real estate financing. Housing finance institutions includes banks, housing finance companies, special housing finance institutions, etc.


10.            What are the factors of real estate finance assistance?

Ø   Loan Amount


Ø   Tenure


Ø   Administrative & Processing Cost


Ø   Prepayment charges


Ø   Services


Ø   Value addition


Ø   Sources of finance like HFCs and banks


Ø   EMI calculation method.




1.     What are the characteristics of Venture Capital?


Following are the characteristics of venture capital.

Ø   Mode of Investment


Ø   Objective


Ø   Hands -On Approach


Ø   High Risk-Return Ventures


Ø   Nature Of Firms


Ø   Liquidity


Ø   New Ventures


Ø   Continuous Involvement.


2.     What are the features of Consumer Credit?


The features of Consumer Credit are as follows:

Ø   Parties to the transaction


Ø   Structure of the transaction


Ø   Mode of Payment


Ø   Payment period and Rate of Interest


Ø   Security


3.What are the functions of a factor?


Depending on the type/form of factoring, the main functions of a factor, in general terms, can be classified into five categories:

Ø   Maintenance/administration of sales ledger


Ø   Collection facility of accounts receivable


Ø   Financing facility/trade debts


Ø   Assumption of credit risk/credit control and credit protection and


Ø   Provision of advisory services.


4.    What are the types of bills?


There are various types of bills. They can be classified on the basis of when they are due for payment, whether the documents of title of goods accompany such bills or not, the type of activity they finance, and so on. Some of these bills are:


Demand Bill


Usance Bills


Documentary Bills


D/A Bills


D/P Bills


Clean Bills


5.     What are the types of factoring?


The important forms/types of factoring are as follows: o Recourse and Non-recourse Factoring


o Advance and Maturity Factoring o Full Factoring


Disclosed and Undisclosed Factoring


Domestic and Export/Cross -Border/International Factoring.



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