Question:
State the meaning of finance. What factors determine working capital and fixed capital requirements of a business?
Answer:
No business can be started, run or expanded without finance. There are many sources of finance. Each source has its own merits and demerits. Business needs to choose right source of finance to make the best use of it.
Business finance refers to the money required for carrying out business activities. Factors determining working capital requirements of a business:
- Whether firm is selling goods on credit or cash: If the firm is selling goods on credit or cash, then its working capital requirements will be more. On the other hand, if it is selling in cash, its working capital requirements will be less.
- Speed of sales turnover: A firm whose sales process gets converted into cash soon will have lesser working capital requirements and a firm whose sales process gets converted into cash in delay will have more working capital requirements.
- Size and scale of business: If business is operating at a larger scale then working capital requirements will be more. On the other hand, if size and scale of operations is small, its working capital requirements will be less.
Factors determining Fixed Capital Requirements
- Size and scale of business: If business is operating at a larger scale then fixed capital requirements will be more. On the other hand, if size and scale of operations is small, its fixed capital requirements will be less.
- Technology: A firm using labour intensive method needs lesser fixed capital and a firm using capital intensive methods needs more fixed capital.
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.
Differentiate between a share and a debenture.
Q 4.
Give the full form of GDR and ADR.
Q 5.
What is a commercial paper? What are its advantages and limitations?
Q 7.
Explain in detail the types of debenture a company can issue.
Q 8.
Name two sources of funds under owner's fund.
Q 9.
Which deposits are directly raised from the public?
Q 10.
Explain trade credit and bank credit as sources of short term finance for business enterprises.
Q 11.
State two factors affecting the working capital requirement of a firm.
Q 12.
What advantage does issue of debentures provide over the issue of equity shares?
Q 13.
What do you mean by discounting of bills of exchange?
Q 14.
Why does business enterprise need finance?
Q 15.
Specify the objective of I.D.B.I.
Q 16.
Preference shares are preferred by company but not by investors. Why?
Q 17.
What is business finance? Why do businesses need funds? Explain.
Q 18.
What is factoring? Discuss its pros and cons.
Q 19.
Who regulates the acceptance of public deposits?
Q 20.
State the meaning of finance. What factors determine working capital and fixed capital requirements of a business?
Q 21.
Name any three special financial institutions and state their objectives.
Q 22.
What is lease financing? Discuss its merits and demerits.
Q 23.
What are Indian depository receipts (IDRs)?
Q 24.
Discuss the financial instruments used in international financing.
Q 25.
Why is equity share capital called Risk Capital'?
Q 26.
Explain different types of preference shares which can be issued by a company.
Q 27.
What are retained profits? Discuss their advantages and disadvantages.
Q 28.
State various sources of short and medium term funds.
Q 29.
Why preferences are given to preferential shares?
Q 30.
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 31.
What are public deposits?
Q 32.
Name zones of the Lessors and Lessees in India.
Q 33.
What is the status of debenture holders?
Q 35.
Describe in brief the features of equity shares.
Q 36.
What preferential rights are enjoyed by preference shareholders? Explain.
Q 37.
What are the two important functions of factors?
Q 38.
Who are called the owners of a company?
Q 39.
What is a trade credit?
Q 40.
State various sources of long term funds.
Q 41.
State two factors affecting the fixed capital requirement of a firm.
Q 42.
What is the difference between GDR and ADR? Explain.
Q 43.
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 44.
What are retained earnings?
Q 45.
What are the preferences given to preference shareholders?
Q 46.
As a source of finance retained profit is better than other sources. Do you agree with this view? Give reasons for your answer.
Q 47.
List different types of finance.
Q 48.
Classify internal and external sources on the basis of time.
Q 49.
Preference shares are not suitable for which kind of investors?
Q 50.
List sources of raising long-term and short term finance.
