Unit 4: Sources of Business Finance — Online MCQ Test
COMMERCE & ACCOUNTANCY · CLASS 11 INTERMEDIATE 1 YEAR · Telangana State Board
Practice Unit 4: Sources of Business Finance with a free chapter-wise online MCQ test.
This chapter covers: This chapter examines short-term medium-term long-term business financing options equity shares preference shares debentures retained earnings commercial bank loans and financial i....
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Unit 4: Sources of Business Finance — Important Questions & Answers
Which source of finance represents owners' funds in a business?
- A. Debentures
- B. Equity Shares
- C. Bank loan
- D. Trade credit
Answer: B. Equity Shares
Equity shares are issued to owners or shareholders, so they represent ownership capital. Debentures and bank loans are borrowed funds.
Equity shares are issued to owners or shareholders, so they represent ownership capital. Debentures and bank loans are borrowed funds.
Retained earnings are also known as:
- A. Borrowed capital
- B. Internal financing
- C. Preference capital
- D. Loan capital
Answer: B. Internal financing
Retained earnings are profits kept in the business for future use. They are an internal source of finance.
Retained earnings are profits kept in the business for future use. They are an internal source of finance.
A company wants funds without creating a fixed repayment obligation. Which source is most suitable?
- A. Debentures
- B. Equity shares
- C. Bank loan
- D. Public deposit
Answer: B. Equity shares
Equity share capital does not involve fixed repayment like a loan or debenture. It is permanent capital and has no compulsory maturity date.
Equity share capital does not involve fixed repayment like a loan or debenture. It is permanent capital and has no compulsory maturity date.
A company wants to raise funds while giving investors a fixed return and no ownership control. Which option best fits?
- A. Equity shares
- B. Preference shares
- C. Retained earnings
- D. Bonus shares
Answer: B. Preference shares
Preference shareholders usually receive a fixed rate of dividend and do not get full ownership control like equity shareholders. Hence, this source matches the requirement.
Preference shareholders usually receive a fixed rate of dividend and do not get full ownership control like equity shareholders. Hence, this source matches the requirement.
A firm has to expand its plant and machinery but wants finance that is usually available for long periods and often linked with project needs. Which source is most suitable?
- A. Trade credit
- B. Cash credit
- C. Financial institutions
- D. Bills discounting
Answer: C. Financial institutions
Financial institutions provide medium-term and long-term financial support, especially for expansion and development projects. The other options are mainly short-term sources.
Financial institutions provide medium-term and long-term financial support, especially for expansion and development projects. The other options are mainly short-term sources.