Long-Term Sources of Business Finance
Telangana Open School (TOSS) · Class 12 · Business Studies
Flashcards for Long-Term Sources of Business Finance — Telangana Open School (TOSS) Class 12 Business Studies. Quick Q&A cards covering key concepts, definitions, and formulas.
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What is long-term finance?
Answer
Long-term finance refers to funds that are required for a period exceeding one year. These funds are used to meet long-term financial needs such as purchasing fixed assets, modernization, expansion, r…
Why do businesses need long-term finance?
Answer
Businesses need long-term finance for several reasons: (1) to purchase fixed assets like land, buildings, machinery; (2) to fund major corporate activities like mergers, acquisitions, and modernizatio…
What are retained earnings?
Answer
Retained earnings refer to the portion of a company’s profits that are not distributed as dividends to shareholders but are instead kept (retained) and reinvested in the business. This internal source…
What are the merits of retained earnings?
Answer
The merits of retained earnings include: (1) It is a cheap source of capital as no interest or dividend is paid; (2) It enhances financial stability by helping the company face downturns; (3) It benef…
What are the demerits of retained earnings?
Answer
The limitations of retained earnings are: (1) It is only possible when the company earns high profits consistently; (2) It may lead to shareholder dissatisfaction due to lower dividends; and (3) It ma…
What are equity shares?
Answer
Equity shares represent ownership in a company. They do not carry any preferential rights regarding dividend or repayment of capital. Dividends are paid only after preference shareholders, and the rat…
What are the merits of issuing equity shares from the shareholders' point of view?
Answer
From shareholders' perspective, the benefits are: (1) They are owners of the company; (2) They can earn high returns if the company performs well; (3) Share value can increase in the stock market; (4)…
What are the merits of issuing equity shares from the management's point of view?
Answer
From management’s perspective, the advantages are: (1) No charge on assets; (2) No obligation to repay capital during the company’s lifetime; (3) No compulsion to pay dividends; (4) Enhances credibili…
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