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.
Differentiate between a share and a debenture.
Q 3.
In leasing agreement what right is given to lessee?
Q 4.
Explain in detail the types of debenture a company can issue.
Q 5.
Give the full form of GDR and ADR.
Q 7.
What is a commercial paper? What are its advantages and limitations?
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.
What is business finance? Why do businesses need funds? Explain.
Q 17.
Preference shares are preferred by company but not by investors. Why?
Q 18.
Who regulates the acceptance of public deposits?
Q 19.
What is factoring? Discuss its pros and cons.
Q 20.
Name any three special financial institutions and state their objectives.
Q 21.
State the meaning of finance. What factors determine working capital and fixed capital requirements of a business?
Q 22.
What are Indian depository receipts (IDRs)?
Q 23.
What is lease financing? Discuss its merits and demerits.
Q 24.
Discuss the financial instruments used in international financing.
Q 25.
What are retained profits? Discuss their advantages and disadvantages.
Q 26.
Why preferences are given to preferential shares?
Q 27.
Why is equity share capital called Risk Capital'?
Q 28.
State various sources of short and medium term funds.
Q 29.
Explain different types of preference shares which can be issued by a company.
Q 30.
What are public deposits?
Q 31.
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 32.
Name zones of the Lessors and Lessees in India.
Q 33.
What is the status of debenture holders?
Q 34.
What preferential rights are enjoyed by preference shareholders? Explain.
Q 35.
Describe in brief the features of equity shares.
Q 37.
What is a trade credit?
Q 38.
Who are called the owners of a company?
Q 39.
What are the two important functions of factors?
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.
Classify internal and external sources on the basis of time.
Q 45.
List sources of raising long-term and short term finance.
Q 46.
Debentures are good from debenture holders point of view but not for business. Do you agree? Explain.
Q 47.
List different types of finance.
Q 48.
State the merits and demerits of public deposits and retained earnings as methods of business finance.
Q 49.
Preference shares are not suitable for which kind of investors?
Q 50.
As a source of finance retained profit is better than other sources. Do you agree with this view? Give reasons for your answer.
