Sources of Business Finance
Himachal Pradesh Board · Class 11 · Business Studies
Flashcards for Sources of Business Finance — Himachal Pradesh Board Class 11 Business Studies. Quick Q&A cards covering key concepts, definitions, and formulas.
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What is business finance and why is it called the 'life blood' of any business?
Answer
Business finance refers to the funds required by a business to carry out its various activities. It is called the 'life blood' of any business because: • No business can function without adequate fund…
Distinguish between Fixed Capital Requirements and Working Capital Requirements.
Answer
Fixed Capital Requirements: • Funds needed to purchase fixed assets like land, building, plant & machinery • Remains invested for a long period • Used once at the time of establishing business • Examp…
What are the three main bases for classifying sources of business finance?
Answer
The three main bases for classifying sources of business finance are: 1. On the basis of PERIOD: - Long-term (more than 5 years) - Medium-term (1-5 years) - Short-term (less than 1 year) 2.
What are retained earnings? List any three merits of this source of finance.
Answer
Retained Earnings: The portion of net earnings that is not distributed as dividends but kept in the business for future use. Three Merits: 1. Permanent source of funds - no need to repay 2. No explic…
Explain trade credit with its advantages and limitations.
Answer
Trade Credit: Credit extended by one trader to another for purchase of goods and services, appearing as 'sundry creditors' in buyer's books. Advantages: • Convenient and continuous source • Readily a…
What is factoring? Differentiate between recourse and non-recourse factoring.
Answer
Factoring: A financial service where receivables are sold to a factor at a discount, and the factor handles credit control and debt collection. Recourse Factoring: • Client not protected against bad …
Define lease financing and explain the roles of lessor and lessee.
Answer
Lease Financing: A contractual agreement where the owner of an asset grants another party the right to use the asset for a periodic payment. Lessor: • Owner of the asset • Grants right to use asset •…
What are public deposits? State any three merits and two limitations.
Answer
Public Deposits: Deposits raised by companies directly from the public, usually for up to 3 years, regulated by RBI. Merits: 1. Simple procedure without restrictive conditions 2. Lower cost than bank…
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