What should an entrepreneur check first before taking a loan?
Answer and explanation
Correct answer: Repayment ability and cash flow
Before borrowing, the entrepreneur should estimate whether the business will generate enough cash to meet instalments, interest, and other expenses on time. A large loan is not automatically beneficial and can create financial stress if repayment capacity is weak. The lender’s appearance is irrelevant, and every loan needs a realistic repayment plan.
Frequently asked questions
What is the correct answer to this question?
Repayment ability and cash flow
Why is this the correct answer?
Before borrowing, the entrepreneur should estimate whether the business will generate enough cash to meet instalments, interest, and other expenses on time. A large loan is not automatically beneficial and can create financial stress if repayment capacity is weak. The lender’s appearance is irrelevant, and every loan needs a realistic repayment plan.
Which subject and chapter does this question cover?
This is a Class 12 Business Studies question. Chapter: Financial Management. Topic: Financing decision.
