Class 11 Business Studies: Sources of Business Finance
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Questions and Answers

What is the term used for the money required to run a business?

  • Investment
  • Capital (correct)
  • Profit
  • Revenue

    • Why is finance considered the lifeblood of a business?

  • To finance expansion needs
  • To purchase fixed assets
  • To ensure smooth day-to-day operations (correct)
  • To maximize profits

    • What is the term for the funds required by a business to purchase land, building, and machinery?

  • Working capital
  • Venture capital
  • Fixed Capital Requirements (correct)
  • Seed capital

    • What is the term used for the sum of money invested by an entrepreneur in a business?

    <p>Capital</p> Signup and view all the answers

    Which activity is undertaken with a motive of serving the society and profit earning in the long run?

    <p>Continuing the business for a long period of time</p> Signup and view all the answers

    What is the term used for the funds required by a business to purchase furniture, fixtures, etc?

    <p>Working capital</p> Signup and view all the answers

    What is the definition of working capital requirements?

    <p>Funds used for day-to-day business operations</p> Signup and view all the answers

    Which of the following is an example of short-term funds?

    <p>Loans from financial institutions</p> Signup and view all the answers

    What are the sources of long-term funds?

    <p>Shares and debentures</p> Signup and view all the answers

    Which source of funds includes profits that are reinvested into the business?

    <p>Retained earnings</p> Signup and view all the answers

    What are external sources of financing?

    <p>Borrowings from commercial banks, accepting public deposits</p> Signup and view all the answers

    What does retained earnings represent as a source of finance?

    <p>Permanent source with operational flexibility and no explicit cost involved</p> Signup and view all the answers

    What is the limitation of retained earnings as a source of finance?

    <p>Excess retention of profits may lead to a decrease in market price of equity shares</p> Signup and view all the answers

    What is the basis for classifying sources of funds as short term, medium term, or long term?

    <p>Period for which funds are required</p> Signup and view all the answers

    Which is an example of an external source of financing that fulfills large money requirements?

    <p>Issue of debentures</p> Signup and view all the answers

    What is one advantage of internal sources of funds compared to external sources?

    <p>Cost-effective and fulfills limited needs</p> Signup and view all the answers

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