Chapter Exam

Chapter 19: Sources of Business Finance — Online MCQ Test

Q: Which of the following is considered an internal source of business finance?

Answer: A. Retained earnings — Retained earnings represent profits kept within the business rather than distributed as dividends, making it an internal source.

Q: The owners of the company are known as ________.

Answer: B. Equity shareholders — Equity shareholders provide risk capital and are considered the legal owners of the joint-stock company.

Q: Which of the following is a characteristic feature of preference shares?

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.

Q: Which factor primarily influences the choice of finance if a company wants to maintain its 'Debt-Equity' ratio?

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.

COMMERCE · CLASS 11th · Tamil Nadu State Board

Practice Chapter 19: Sources of Business Finance with a free chapter-wise online MCQ test for Tamil Nadu State Board CLASS 11th COMMERCE. 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.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 19: Sources of Business Finance — Important Questions & Answers (FAQ)

Frequently asked questions from Tamil Nadu State Board CLASS 11th COMMERCE — Chapter 19: 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 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.

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.

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.

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.

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.

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