Sources of Business Finance

What is the central idea of the chapter "Sources of Business Finance"?

1. Businesses should always depend only on bank loans.
2. Businesses require different sources of finance for short-term and long-term needs, and the choice depends on factors such as cost, risk, ownership, control, repayment ability, and business objectives.
3. Equity shares are suitable for every financial requirement.
4. Borrowed funds are always better than owned funds.

Which source of finance is commonly used by companies for expansion without immediate repayment obligations?

1. Equity Shares
2. Bank Overdraft
3. Trade Credit
4. Cash Credit

Which factor mainly influences the choice of a source of finance?

1. Personal hobbies of managers
2. Cost, risk, control, and repayment capacity
3. Weather conditions only
4. Employee preferences only

Why do businesses require working capital?

1. To purchase fixed assets only
2. To meet day-to-day operating expenses
3. To distribute dividends only
4. To pay income tax only

Which of the following is an example of borrowed funds?

1. Retained Earnings
2. Equity Shares
3. Debentures
4. Owner's Capital

Which source of finance is generally considered permanent capital?

1. Trade Credit
2. Bank Overdraft
3. Equity Share Capital
4. Public Deposits

Which source of finance does NOT involve ownership dilution?

1. Equity Shares
2. Debentures
3. Rights Issue of Shares
4. Bonus Shares

Public deposits are accepted directly from:

1. Government only
2. General Public
3. Foreign Governments
4. Employees only

Which institution mainly provides long-term finance for industrial development?

1. Commercial Banks
2. Financial Institutions
3. Retail Stores
4. Insurance Agents

Preference shareholders receive:

1. No dividend
2. Fixed rate of dividend before equity shareholders
3. Voting rights equal to equity shareholders
4. Unlimited profits

Which source of finance is generally suitable for meeting short-term financial requirements?

1. Equity Shares
2. Debentures
3. Trade Credit
4. Preference Shares

Debentures are mainly issued to raise:

1. Ownership Capital
2. Borrowed Capital
3. Government Revenue
4. Personal Savings

Which source of finance represents ownership capital?

1. Debentures
2. Bank Loan
3. Equity Shares
4. Public Deposits

Which of the following is an internal source of business finance?

1. Bank Loan
2. Public Deposits
3. Retained Earnings
4. Debentures

What is meant by business finance?

1. Money spent on personal expenses
2. Funds required for establishing and running a business
3. Government tax collection
4. Purchase of household goods