Important Sources of Business Finance MCQs for Class 11 Students
MCQs for Business Studies Class 11 Chapter 8 are essential for every Commerce student preparing for CBSE board exams and school-level tests. This chapter focuses on the different sources of business finance, a foundational concept for both exams and real-world business management. Practicing these MCQs helps in mastering key ideas of capital, financial institutions, and funding types—skills valuable in exams and day-to-day business knowledge.
| Source of Business Finance | Definition | Example | Type (Internal/External) |
|---|---|---|---|
| Equity Shares | Capital raised by issuing shares to public or owners. | Public equity, private placement | Internal |
| Debentures | Funds raised by borrowing from the public with a promise to repay with interest. | Company debentures, convertible debentures | External |
| Retained Earnings | Profits kept back in the business for reinvestment. | Ploughing back profits | Internal |
| Public Deposits | Funds raised directly from the public for a fixed period. | Fixed deposits accepted by companies | External |
| Trade Credit | Credit extended by suppliers to business for goods/services bought. | Purchase on account | External |
| Commercial Paper | Short-term unsecured promissory notes issued by companies. | Commercial Paper issued for liquidity | External |
| Lease Financing | Right to use asset for payment of periodic rent. | Leasing equipment or vehicles | External |
MCQs for Business Studies Class 11 Chapter 8 (with Answers)
Solving these MCQs for Business Studies Class 11 Chapter 8 helps you understand all possible exam patterns and question types. Practicing regularly aids in concept clarity and quick revision, boosting your confidence before school or CBSE board exams.
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Money obtained by issue of shares is called
(a) Debt
(b) Reserve Capital
(c) Share Capital
(d) Borrowed Funds
Answer: (c) Share Capital -
If the credit is extended by one trader to another for the purchase of goods and services, it is called
(a) Trade Credit
(b) Loan
(c) Debt
(d) Asset
Answer: (a) Trade Credit -
Which of the following is a source of internal business finance?
(a) Debentures
(b) Retained Earnings
(c) Commercial Paper
(d) Public Deposits
Answer: (b) Retained Earnings -
Commercial paper is a type of
(a) Long-term finance
(b) Short-term finance
(c) Equity
(d) Lease
Answer: (b) Short-term finance -
Which organization in India provides financial assistance to industries for modernisation?
(a) SIDBI
(b) SBI
(c) IFCI
(d) ICICI
Answer: (c) IFCI -
ADRs (American Depository Receipts) are issued in
(a) India
(b) USA
(c) UK
(d) Japan
Answer: (b) USA -
Funds raised through loans or borrowings are called
(a) Owners’ funds
(b) Borrowed funds
(c) Reserve funds
(d) Share capital
Answer: (b) Borrowed funds -
Funds required for purchasing current assets are called
(a) Fixed capital
(b) Working capital
(c) Reserve capital
(d) Share capital
Answer: (b) Working capital -
Equity shareholders are
(a) Owners of the company
(b) Creditors
(c) Lenders
(d) Employees
Answer: (a) Owners of the company -
Which one is a medium-term source of finance (more than 1 but less than 5 years)?
(a) Equity shares
(b) Debentures
(c) Bank Loan (3 years)
(d) Retained earnings
Answer: (c) Bank Loan (3 years)
Concept Recap: Sources of Business Finance
- Owners’ funds: Money invested by owners (e.g., equity shares, retained earnings). Suitable for long-term needs and gives control.
- Borrowed funds: Money borrowed for interest (e.g., debentures, bank loans, public deposits). Used for expansion or short-term needs.
- Internal sources: Raised within the business (retained earnings). Low cost and less risk.
- External sources: Raised from outside the business (shares, debentures, deposits, trade credit).
- Short-term sources: Required for up to 1 year (trade credit, commercial paper, bank overdraft, public deposits).
- Long-term sources: Needed for more than 5 years (shares, debentures, term loans from financial institutions).
Real-World Application and Exam Relevance
MCQs for Business Studies Class 11 Chapter 8 are useful for students aiming for high scores in board and competitive exams. Understanding finance sources is also vital for future business leaders and entrepreneurs. For further explanations, look at Vedantu’s detailed topic pages such as Sources of Business Finance, and explore related concepts like Fixed and Working Capital to solidify your basics.
Practice and Download
- Download PDF of MCQs for Class 11 Business Studies Chapter 8
- More Business Studies Objective Questions
- For advanced concepts and exam strategies, visit Vedantu Commerce.
Important Internal Links for Mastery
- Financial Market – Learn about instruments like shares, debentures, and banks.
- Equity Shares and Preference Shares – Deep dive into share types.
- Debentures – Key for debt financing questions.
- Lease Finance and Public Deposits – Understand alternative financing methods.
- Working Capital – Practice MCQs about day-to-day fund needs.
In summary, practicing MCQs for Business Studies Class 11 Chapter 8 strengthens your foundation for exams and business problem-solving. Focus on understanding the classification of funds, practical examples, and differentiating key finance concepts. Use Vedantu’s structured content to improve your scores and real-life business knowledge.
FAQs on Business Studies Class 11 Chapter 8 MCQs (With Answers & Explanations)
1. How to score full marks in Business Studies Class 11 MCQ section?
To score full marks in the Business Studies Class 11 MCQ section, focus on mastering key concepts from the NCERT textbook and CBSE syllabus. Thoroughly understand each chapter, paying close attention to definitions, examples, and case studies. Practice a wide variety of MCQs, including those from past papers and sample tests. Regular revision is crucial for long-term retention. Use Vedantu's resources for additional practice and clarification.
2. What is money obtained by issue of shares called?
Money obtained by issuing shares is called share capital. This represents equity financing, where the company sells ownership stakes to raise funds. Understanding the difference between share capital and debt financing (like debentures) is crucial for Class 11 Business Studies.
3. Is Class 11 Business Studies Chapter 8 considered difficult?
Class 11 Business Studies Chapter 8 (Sources of Business Finance) can be challenging for some students due to its conceptual nature. However, with consistent effort and the right resources, it can be mastered. Focus on understanding the different sources of business finance, their characteristics, and their implications for a business. Use practice MCQs and seek help when needed. Vedantu's study materials can provide substantial support.
4. Where can I find MCQs for Business Studies Class 11 Chapter 8 with answers and PDF download?
You can find MCQs for Business Studies Class 11 Chapter 8 with answers and PDF downloads on educational websites like Vedantu. Look for resources specifically designed for the CBSE syllabus. Many websites provide online practice tests and downloadable question banks to aid in exam preparation. Ensure the source is reliable and aligned with the current syllabus.
5. Which is the most important topic in Chapter 8 for exams?
While all topics in Chapter 8 are important, understanding the differences between internal and external sources of finance, and the various types within each category (like equity vs. debt), is typically emphasized in exams. Mastering the concepts of share capital, debentures, and short-term vs. long-term financing is also key to success.
6. What is the difference between internal and external sources of business finance?
Internal sources of finance are funds generated within the business itself, such as retained earnings or sale of assets. External sources involve raising funds from outside the business, for example through loans, shares, or debentures. The choice depends on factors like the business's financial position, its size, and its growth plans. Understanding this distinction is fundamental to Chapter 8.
7. Why is trade credit considered both a risk and opportunity for businesses?
Trade credit, a form of short-term financing, offers opportunities by allowing businesses to purchase goods and services without immediate payment, boosting working capital. However, it presents risks if not managed effectively, leading to potential late payment penalties or strained supplier relationships. Careful assessment of credit terms and cash flow management is crucial.
8. How do Indian financial institutions like IFCI and ICICI impact business financing?
Financial institutions like IFCI (Industrial Finance Corporation of India) and ICICI (Industrial Credit and Investment Corporation of India) significantly impact business financing in India by providing various financial products and services, including term loans, working capital financing, and project financing, contributing significantly to the nation's economic growth. They play a crucial role in supporting various Indian businesses.
9. When should a company prefer debentures over equity as a source of funds?
A company might prefer debentures (debt financing) over equity when it wants to avoid diluting ownership and control. Debentures offer tax advantages on interest payments and maintain the company's existing ownership structure, but they come with a commitment to repay principal and interest, potentially impacting cash flow. The optimal choice depends on specific financial needs and risk tolerance.
10. What are the recent CBSE trends in asking MCQs on lease financing and factoring?
Recent CBSE trends show an increasing focus on conceptual understanding of lease financing and factoring in MCQs. Questions often assess the differences between these methods and their suitability for various businesses. Thorough comprehension of their advantages, disadvantages, and application contexts is vital for exam success.
