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Questions and Answers
What is the meaning of business finance?
What is the meaning of business finance?
- Funds required for personal investments
- Funds required for government projects
- Funds required by a business to carry out its various activities (correct)
- Funds required for charitable activities
What are the fixed capital requirements of an enterprise?
What are the fixed capital requirements of an enterprise?
- Funds required for charitable activities
- Funds required to purchase fixed assets like land, building, and machinery (correct)
- Funds required for personal investments
- Funds required for short-term expenses
What is the classification of sources of funds based on period?
What is the classification of sources of funds based on period?
- Fixed sources, variable sources, mixed sources
- Long-term sources, medium-term sources, short-term sources (correct)
- Internal sources, external sources, hybrid sources
- Primary sources, secondary sources, tertiary sources
What are working capital requirements used for?
What are working capital requirements used for?
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What is the time period for short-term funds?
What is the time period for short-term funds?
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Study Notes
Business Finance
- Business finance refers to the management of an organization's financial resources to achieve its objectives
- It involves the acquisition, allocation, and management of funds to meet business needs
Capital Requirements
- Fixed capital requirements refer to the amount of funds required to acquire and maintain fixed assets such as land, buildings, and equipment
- Fixed capital requirements are typically one-time investments with a long-term impact on the business
Classification of Sources of Funds
- Sources of funds can be classified into two categories based on period: long-term and short-term
- Long-term sources of funds include equity shares, debentures, and long-term loans
- Short-term sources of funds include bank overdrafts, short-term loans, and creditors
Working Capital Requirements
- Working capital requirements refer to the amount of funds required to meet the daily operational needs of a business
- Working capital is used to purchase raw materials, pay wages, and meet other expenses necessary to operate the business
Short-Term Funds
- Short-term funds are typically used for a period of less than one year
- Short-term funds are used to finance current assets such as inventory, accounts receivable, and cash
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