Question:
What is business finance? Why do businesses need funds? Explain.
Answer:
Business is concerned with production and distribution of goods and services for the satisfaction of need of society. A business cannot function unless adequate funds are made available to it. The need of fund arises from the stage when an entrepreneur makes a decision to start a business. Some funds are needed immediately. The financial need of a business can be categorized in the following ways:
- Fixed Capital Requirements: In order to start business, funds are required to purchase fixed assets like land and building, plant and machinery, and furniture and fixures. This is known as fixed capital requirement of an enterprise.
- Working Capital Requirements: The financial requirements of an enterprise do not end with the procurement of fixed assets. No matter how small or large business, it need funds for its day-to-day operations. This is known as working capital of an enterprise which is used for holding current assets like stock, bill receivable, current expenses etc. Therefore, a business needs funds to meet its fixed as well as working capital requirements.
Sources of Business Finance
Q 1.
Write a note on international sources of finance.
Q 2.
In leasing agreement what right is given to lessee?
Q 3.
What is a commercial paper? What are its advantages and limitations?
Q 5.
Explain in detail the types of debenture a company can issue.
Q 6.
Name two sources of funds under owner's fund.
Q 7.
Which deposits are directly raised from the public?
Q 8.
Explain trade credit and bank credit as sources of short term finance for business enterprises.
Q 9.
State two factors affecting the working capital requirement of a firm.
Q 10.
What advantage does issue of debentures provide over the issue of equity shares?
Q 11.
Differentiate between a share and a debenture.
Q 12.
What is business finance? Why do businesses need funds? Explain.
Q 13.
What is lease financing? Discuss its merits and demerits.
Q 14.
Specify the objective of I.D.B.I.
Q 15.
Give the full form of GDR and ADR.
Q 16.
Why does business enterprise need finance?
Q 17.
What is factoring? Discuss its pros and cons.
Q 18.
Discuss the financial instruments used in international financing.
Q 19.
Why is equity share capital called Risk Capital'?
Q 20.
State the meaning of finance. What factors determine working capital and fixed capital requirements of a business?
Q 21.
Who regulates the acceptance of public deposits?
Q 22.
What do you mean by discounting of bills of exchange?
Q 23.
Preference shares are preferred by company but not by investors. Why?
Q 24.
Name any three special financial institutions and state their objectives.
Q 25.
What are Indian depository receipts (IDRs)?
Q 26.
State various sources of short and medium term funds.
Q 27.
What are public deposits?
Q 28.
What is the status of debenture holders?
Q 29.
Describe in brief the features of equity shares.
Q 30.
Explain different types of preference shares which can be issued by a company.
Q 31.
Why preferences are given to preferential shares?
Q 32.
Retained earnings are not a good source from the values point of view as it is the right of equity shareholders. Do you agree? Justify your answer.
Q 33.
Name zones of the Lessors and Lessees in India.
Q 34.
Mr. John has ? 1,00,000 for investment purposes. Should he invest in equity shares, preference shares, public deposits or debentures? Justify your answer.
Q 35.
What are the two important functions of factors?
Q 36.
Who are called the owners of a company?
Q 37.
What are the preferences given to preference shareholders?
Q 38.
What preferential rights are enjoyed by preference shareholders? Explain.
Q 39.
What are retained profits? Discuss their advantages and disadvantages.
Q 40.
State two factors affecting the fixed capital requirement of a firm.
Q 42.
What is a trade credit?
Q 43.
Discuss the sources from which a large industrial enterprise can raise capital for financing modernisation and expansion.
Q 44.
List sources of raising long-term and short term finance.
Q 45.
Preference shares are not suitable for which kind of investors?
Q 46.
Describe briefly the factors responsible for selecting a source of finance.
Q 47.
Write a short note on the features of GDRs.
Q 48.
Classify internal and external sources on the basis of time.
Q 49.
As a source of finance retained profit is better than other sources. Do you agree with this view? Give reasons for your answer.
Q 50.
What are retained earnings?
