Sources of Business Finance
ICSE · Class 12 · Business Studies
Flashcards for Sources of Business Finance — ICSE Class 12 Business Studies. Quick Q&A cards covering key concepts, definitions, and formulas.
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What are the two broad categories of sources of business finance?
Answer
Sources of business finance are divided into owned funds and borrowed funds. Owned funds include equity shares, preference shares, retained profits, global depository receipts, angel investors, ventur…
Equity shares: what do they mean and what are their main features?
Answer
Equity shares are shares that carry no preferential rights in dividend payment or repayment of capital. They are issued before any other type of shares. Dividend on equity shares is not fixed and is p…
Why are equity shareholders called owners of the company?
Answer
Equity shareholders are called owners because they hold the residual claim on the company. They receive dividend after preference shareholders and receive payment at winding up only after creditors an…
Preference shares: define them and explain why they are called a hybrid security.
Answer
Preference shares are shares that carry certain preferential rights. A fixed rate of dividend is paid on them before any dividend is paid on equity shares, and at winding up they are repaid before equ…
When can preference shareholders get voting rights?
Answer
Preference shareholders generally do not have voting rights. They can get voting rights if their dividends remain unpaid for the prescribed number of years.
Debentures and bonds: what are they?
Answer
Debentures and bonds are documents or certificates issued by a company under its seal as acknowledgment of debt. They represent borrowed funds. They usually carry fixed interest, generally have no vot…
Why is interest on debentures payable even when a company suffers loss?
Answer
Debenture interest is a fixed obligation of the company. It is payable every year irrespective of whether the company makes profit or suffers loss. This makes debentures different from share dividends…
What protection do debenture holders get if interest or repayment is not made on time?
Answer
Debenture holders can take legal action against the company, including winding up, if interest or the borrowed sum is not paid in time. Debentures generally involve a charge on the assets of the compa…
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