Chapter Exam

Chapter 8: Sources of Business Finance — Online MCQ Test

Q: Which of the following is a source of internal finance?

Answer: B. Retained earnings — Retained earnings are profits kept aside by the business and used for expansion or other needs. They are an internal source of finance.

Q: Equity shares are also known as:

Answer: B. Owners' funds — Equity shareholders are the owners of the company and provide ownership capital. Hence, equity shares are called owners' funds.

Q: A business uses profits retained in the company for future expansion. This source of finance is called:

Answer: B. Retained earnings — When profits are not distributed as dividends and are kept in the business, they become retained earnings. These can be used for expansion and other business needs.

Q: A firm wants funds but does not want to dilute ownership control. Which source is most appropriate?

Answer: B. Retained earnings — Retained earnings provide finance without bringing in new owners. Therefore, ownership control remains unchanged.

BUSINESS STUDIES · CLASS 11 FIRST PUC · Karnataka State Board

Practice Chapter 8: Sources of Business Finance with a free chapter-wise online MCQ test for Karnataka State Board CLASS 11 FIRST PUC BUSINESS STUDIES. This chapter covers: This chapter covers business finance concepts short-term long-term funding sources retained earnings equity preference shares debentures commercial banks and financial institutions.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 8: Sources of Business Finance — Important Questions & Answers (FAQ)

Frequently asked questions from Karnataka State Board CLASS 11 FIRST PUC BUSINESS STUDIES — Chapter 8: Sources of Business Finance, with answers and explanations. These are sample questions; the exam has its own separate question set.

Which of the following is a source of internal finance?

A. Issue of debentures
B. Retained earnings ✓
C. Bank loan
D. Public deposit

Answer: B. Retained earnings
Retained earnings are profits kept aside by the business and used for expansion or other needs. They are an internal source of finance.

Equity shares are also known as:

A. Preference capital
B. Owners' funds ✓
C. Borrowed capital
D. Short-term loans

Answer: B. Owners' funds
Equity shareholders are the owners of the company and provide ownership capital. Hence, equity shares are called owners' funds.

A business uses profits retained in the company for future expansion. This source of finance is called:

A. Issue of shares
B. Retained earnings ✓
C. Bank overdraft
D. Lease financing

Answer: B. Retained earnings
When profits are not distributed as dividends and are kept in the business, they become retained earnings. These can be used for expansion and other business needs.

A firm wants funds but does not want to dilute ownership control. Which source is most appropriate?

A. Issue of equity shares
B. Retained earnings ✓
C. Fresh issue of shares to public
D. Sale of ownership rights

Answer: B. Retained earnings
Retained earnings provide finance without bringing in new owners. Therefore, ownership control remains unchanged.

A company earns high profits every year but distributes very little dividend. Which of the following is the most likely effect of this policy?

A. More dependence on outside borrowing
B. Increase in retained earnings and self-financing capacity ✓
C. Immediate loss of ownership
D. Reduction in internal finance

Answer: B. Increase in retained earnings and self-financing capacity
When a company retains a larger portion of its profits, retained earnings increase. This improves its ability to finance future needs internally.

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