Commerce · Class 11 Commerce
Ch 19Sources of Business Finance — Class 11 Commerce, concept-first.
Every business, whether a small tea stall or a large manufacturing company, needs money to start, run and grow its operations. This money required to carry on business activities is called business finance.
Key concepts
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Business Finance and Its Classification
Business finance is the money a firm needs to establish, run, and grow its operations, covering both fixed capital (for long-term assets like land, buildings and machinery) and working capital (for day-to-day expenses li…
Most relevant Q&A
- What is meant by fixed capital?Free
- Name any two internal sources of business finance.Preview
- Distinguish between owned funds and borrowed funds, with one example of each.Free
- State any three factors that a business should consider before choosing a source of finance.Preview
- Explain the classification of sources of business finance on the basis of (i) period, (ii) ownership and (iii) source of generation, with su…Free
Chapter contents
The NCERT structure, section by section. Open a section to see its questions, then read the concept-first solution.
Meaning, Need and Importance of Business Finance
Every business, whether a small tea stall or a large manufacturing company, needs money to start, run and grow its operations.
Classification of Sources of Business Finance
Because businesses need funds for different purposes, for different durations and from different quarters, the many sources of business finance are usually grouped under three broad classifications.
Owned Sources of Finance — Equity Shares, Preference Shares and Retained Earnings
Owned sources of finance are those contributed by, or belonging to, the owners of a company, and they form the base on which a company's entire capital structure is built.
Borrowed Sources of Finance — Debentures, Institutional Loans and Public Deposits
Borrowed sources of finance are funds raised from outsiders who are not owners of the business but who lend money to it for a specified period, in return for a fixed rate of interest and a promise of…
Short-Term and Modern Sources of Finance — Trade Credit, Commercial Paper, Lease Financing, Factoring and Venture Capital
Alongside the traditional long- and medium-term sources, businesses regularly use a set of short-term and more specialised instruments to meet immediate working-capital needs or to access funds withou…
Factors Affecting the Choice of Source of Finance
No single source of finance is ideal for every business or every situation, and a firm's finance manager must weigh several factors before deciding which source, or combination of sources, to use for…
Very Short Answer Questions
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Short Answer Questions
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Long Answer Questions
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- Q11Explain the classification of sources of business finance on the basis of (i) period, (ii) ownership and (iii) source of generation, with su…Free
- Q12Explain any four owned and borrowed sources of long-term finance available to a company.Preview
- Q13"No single source of finance is suitable for every business situation." Discuss the factors that influence the choice of an appropriate sour…Preview
Sample & Board Papers
Sample papers and previous-year board questions for this subject.
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- Q1Debenture holders are entitled to a fixed rate of ________. (a) Dividend (b) Profits (c) Interest (d) BonusPreview
- Q2What do you mean by public deposit ?Preview
- Q3Equity shareholders are the ________ of a company. (a) Debtors (b) Creditors (c) Employees (d) OwnersPreview
- Q4Debenture holders are entitled to a fixed rate of ______. (a) Profits (b) Interest (c) Dividend (d) None of the abovePreview
- Q5Classify the sources of Business Finance on the basis of Period.Preview
- Q6Equity shareholders are the ______ of a company. (a) debtors (b) creditors (c) employees (d) ownersPreview
- Q7Debenture holders are entitled to a fixed rate of ......... (a) Dividend (b) Profits (c) Interest (d) RatiosPreview
More questions
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- Q1Which of the following is classified as an OWNED source of business finance? (A) Debentures (B) Trade credit (C) Equity shares (D) Public de…Free
- Q2Preference shareholders generally do NOT enjoy which of the following rights? (A) Fixed rate of dividend (B) Preferential repayment of capit…Free
- Q3Which source of finance is described as a 'short-term, unsecured promissory note' issued in the money market by large, creditworthy companie…Preview
- Q4A business sells its outstanding trade receivables (debtors) to a financial institution at a discount, in order to obtain immediate cash. Th…Preview
- Q5Venture capital is most typically provided to: (A) Large, well-established companies with a long credit history (B) New, innovative or high-…Preview