Saturday, 23 January 2021

CH 17 -SOURCES OF BUSINESS FINANCE

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L-17 SOURCES OF BUSINESS FINANCE

 

 A. One Word or One Line Questions

 

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)