L-17 SOURCES OF
BUSINESS FINANCE
Q. 1. What do
you mean by Business Finance?
Ans. Business finance is that business activity which
deals with acquisition, and use of funds in order to achieve the overall
objectives of the business.
Q. 2. Name
different categories of finance.
Ans. (i) Public Finance,
(ii)
Private Finance.
Q. 3. Name
types of Business Finance.
Ans. Long Term Finance, Medium Term Finance, Shor t
Term Finance.
Q. 4. What are
the main source s of medium term finance?
Ans. Debentures, Banks, Public deposit set c.
Q. 5. What are
the source s of short term finance?
Ans. Commercial Banks, Customer Advances, Trade
Creditor set c.
Q. 6. Name
types of shares.
Ans. Equity Shares, Preference Shares, Defer red
Shares.
Q. 7. Why is equity
share called a permanent source of funds?
Ans. Because equity share capital can be returned only
on the liquidation of the company.
Q. 8. Name types
of preference shares.
Ans. Cumulative, non -cumulative, redeemable,
irredeemable, participating, nonparticipating, convertible and non -convertible
preference shares.
Q. 9. What are
Deferred Shares?
Ans. These are known as promoters or founder s shares
because these are issued to promoters
for their services rendered to the company.
Q. 10. What is
Retained Earnings?
Ans. It refers to that part of total profits which are
re-invested or re-employed into
business.
Q. 11. Which
cate gory of shareholders participate in the management of the company?
Ans. Equity shareholders.
Q. 12. Out of
owners ' funds and borrowed funds, which one is a permanent source of finance?
Ans. Owner's funds.
Q. 13. What do
you mean by FDI?
Ans. Foreign
Direct Investment means direct investment s in projects of domestic economy by a foreign investors.
B. Fill in the
blanks
1. Shor t finance is generally required for a period
of.........
2. Other name of owner's fund is.........
3. Convertible preference shares can be converted into
......... shares after a specified period of term.
4. ......... is a document of acknowledgement of debt.
5. ......... cannot carry any voting rights.
Ans.
1. 1 year; 2. Ownership, Securities; 3.equity shares; 4. A debenture; 5.
Debenture holders
C. True or False
1. Without adequate finance, no business can carry out
its operations.
2. Preference shareholders are not the owner s of the
company.
3. Equity shares cannot be redeemed except in case of
winding up of company.
4. In cash credit a customer is given credit upto a
definite limit against his cur rent
assets.
5. ADR represents the number of shares hold by an
foreign investor in a company
registered in
India.
Ans.
1. True, 2. True, 3. True, 4. True, 5. True
D. MCQ
1. What is life
blood of every business enterprise?
(a) Cash
(b) Finance
(c) Government
(d) Owner
2. Medium term
finance is generally required for a period of:
(a) 1 to 3 years
(b) 2 to 5 years
(c) 2 to 4 years
(d) 1 to 5 years
3. Short term
finance is also called as
(a) Short Term Capital
(b) Working Capital
(c) Retained Earnings
(d) Both (a) and (b)
4. Debentures
are a part of:
(a) Owned Capital
(b) Borrowed Capital
(c) Both a and b
(d) None of the above
Ans.
1. (b), 2. (b), 3. (d), 4. (b)
