What should be understood while taking a loan?
Answer and explanation
Correct answer: Interest, tenure, and repayment ability
A loan creates a financial obligation because the borrowed principal normally has to be repaid along with interest according to agreed terms. Before borrowing, a business should understand the interest rate, repayment period, instalments, possible charges, and whether its expected cash flow can meet them. Option A contains the essential considerations. The other options are unrelated to responsible borrowing and cannot help assess affordability.
Frequently asked questions
What is the correct answer to this question?
Interest, tenure, and repayment ability
Why is this the correct answer?
A loan creates a financial obligation because the borrowed principal normally has to be repaid along with interest according to agreed terms. Before borrowing, a business should understand the interest rate, repayment period, instalments, possible charges, and whether its expected cash flow can meet them. Option A contains the essential considerations. The other options are unrelated to responsible borrowing and cannot help assess affordability.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Sources of Business Finance. Topic: Borrowed Funds.
