Chapter 19: Sources of Business Finance — Online MCQ Test
COMMERCE · CLASS 11th · Tamil Nadu State Board
Practice Chapter 19: Sources of Business Finance with a free chapter-wise online MCQ test.
This chapter covers: This chapter covers short-term and long-term business financing options. Students study equity shares preference shares retained earnings debentures commercial banks and personal i....
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Chapter 19: Sources of Business Finance — Important Questions & Answers
Which of the following is considered an internal source of business finance?
- A. Retained earnings
- B. Bank loans
- C. Debentures
- D. Public deposits
Answer: A. Retained earnings
Retained earnings represent profits kept within the business rather than distributed as dividends, making it an internal source.
Retained earnings represent profits kept within the business rather than distributed as dividends, making it an internal source.
The owners of the company are known as ________.
- A. Debenture holders
- B. Equity shareholders
- C. Creditors
- D. Bankers
Answer: B. Equity shareholders
Equity shareholders provide risk capital and are considered the legal owners of the joint-stock company.
Equity shareholders provide risk capital and are considered the legal owners of the joint-stock company.
Which of the following is a characteristic feature of preference shares?
- A. They carry voting rights
- B. They have a fixed rate of dividend
- C. Dividend is paid only after equity shareholders
- D. They are always unsecured
Answer: B. They have a fixed rate of dividend
Preference shareholders enjoy a preferential right to receive a fixed rate of dividend before any dividends are paid to equity shareholders.
Preference shareholders enjoy a preferential right to receive a fixed rate of dividend before any dividends are paid to equity shareholders.
Compare Equity shares and Debentures: Which statement is true?
- A. Equity shareholders are creditors; Debenture holders are owners.
- B. Equity shares provide permanent capital; Debentures are repayable.
- C. Interest on debentures is optional; dividends are mandatory.
- D. Both carry voting rights.
Answer: B. Equity shares provide permanent capital; Debentures are repayable.
Equity shares are non-redeemable during the lifetime of the company, whereas debentures must be repaid after a specific period.
Equity shares are non-redeemable during the lifetime of the company, whereas debentures must be repaid after a specific period.
Which factor primarily influences the choice of finance if a company wants to maintain its 'Debt-Equity' ratio?
- A. Control and cost of capital
- B. Taxation laws only
- C. Stock exchange regulations
- D. The total assets of the firm
Answer: A. Control and cost of capital
The decision to raise funds involves balancing the cost of debt (interest) and equity (dividends/dilution) while considering management control.
The decision to raise funds involves balancing the cost of debt (interest) and equity (dividends/dilution) while considering management control.