Business Studies

Sources of Business Finance

Question:

Name any three special financial institutions and state their objectives.

Answer:

Given below are three financial institutions along with their objectives:

  1. Industrial Credit and Investment Corporation of India (ICICI): It came into existence in 1955 as a public limited company under the Companies Act, 1956. Objective: ICICI assists the expansion and modernisation of industrial enterprises exclusively in the private sector. The corporation has also encouraged the participation of foreign capital in the country.
  2.  Industrial Development Bank of India (IDBI): It came into existence in 1964 under the Industrial Development Bank of India Act, 1964.
    Objective: Its objective was to coordinate the activities of other financial institutions including commercial banks. The bank performed three types of functions namely, assistance to other financial institutions, direct assistance to industrial concerns and promotion and coordination of financial technique service.
  3. Life Insurance Corporation of India (LIC): It came into existence in 1956 under the LIC Act 1956 after nationalising 245 existing insurance companies.
    Objective: It mobilises the community saving in the form of insurance premia and makes it available to industrial concerns. Both public as well as private, in the form of direct loan and underwriting of an subscription to shares and debentures.
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Sources of Business Finance

Q 1.

Write a note on international sources of finance.

Q 2.

What is a commercial paper? What are its advantages and limitations?

Q 3.

Name two sources of funds under owner's fund.

Q 4.

What is factoring?

Q 5.

In leasing agreement what right is given to lessee?

Q 6.

Explain in detail the types of debenture a company can issue.

Q 7.

Which deposits are directly raised from the public?

Q 8.

Why does business enterprise need finance?

Q 9.

Explain trade credit and bank credit as sources of short term finance for business enterprises.

Q 10.

Differentiate between a share and a debenture.

Q 11.

What advantage does issue of debentures provide over the issue of equity shares?

Q 12.

State two factors affecting the working capital requirement of a firm.

Q 13.

What is business finance? Why do businesses need funds? Explain.

Q 14.

Specify the objective of I.D.B.I.

Q 15.

What is lease financing? Discuss its merits and demerits.

Q 16.

Give the full form of GDR and ADR.

Q 17.

Discuss the financial instruments used in international financing.

Q 18.

What is factoring? Discuss its pros and cons.

Q 19.

Who regulates the acceptance of public deposits?

Q 20.

Why is equity share capital called Risk Capital'?

Q 21.

What do you mean by discounting of bills of exchange?

Q 22.

State the meaning of finance. What factors determine working capital and fixed capital requirements of a business?

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 public deposits?

Q 26.

What are Indian depository receipts (IDRs)?

Q 27.

Why preferences are given to preferential shares?

Q 28.

State various sources of short and medium term funds.

Q 29.

What is the status of debenture holders?

Q 30.

Describe in brief the features of equity shares.

Q 31.

Explain different types of preference shares which can be issued by a company.

Q 32.

Name zones of the Lessors and Lessees in India.

Q 33.

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 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.

State two factors affecting the fixed capital requirement of a firm.

Q 39.

What preferential rights are enjoyed by preference shareholders? Explain.

Q 40.

What are retained profits? Discuss their advantages and disadvantages.

Q 41.

What is a trade credit?

Q 42.

What is debenture?

Q 43.

Discuss the sources from which a large industrial enterprise can raise capital for financing modernisation and expansion.

Q 44.

Describe briefly the factors responsible for selecting a source of finance.

Q 45.

List sources of raising long-term and short term finance.

Q 46.

Preference shares are not suitable for which kind of investors?

Q 47.

As a source of finance retained profit is better than other sources. Do you agree with this view? Give reasons for your answer.

Q 48.

Write a short note on the features of GDRs.

Q 49.

Classify internal and external sources on the basis of time.

Q 50.

State the merits and demerits of public deposits and retained earnings as methods of business finance.