Revision Notes for CBSE Class 11 Business Studies Chapter 8 - Free PDF Download





















FAQs on Sources of Business Finance Class 11 Notes CBSE Business Studies Chapter 8 (Free PDF Download)
1. What are the benefits of retained earnings?
Retained earning is the part of the net earnings that might be retained in the business, to be used in the future. It is the beginning of internal financing or self-financing. It is a permanent source of funds and does not involve any particular cost in the form of interest. It has a higher degree of operational flexibility and freedom. Retained Earnings intensify the capacity of the business to consume staggering losses. It may also lead to an increment in the market price of the equity shares of a company.
2. Define the term Equity Shares.
The ownership of a company is held in the number of equity shares, and the owner's fund includes the capital raised by issuing the equity shares. Equity Shares are referred to as ‘residual owners’. They enjoy the bonus as well as bear the peril of ownership. The equity shares account is limited to capital contributed and they primarily participate in the management. The equity capital works as permanent capital as it is to be compensated only at the time of companies liquidation.
3. What do you mean by business finance? And why do businesses need funds?
Every business or organization needs funds to carry out working and important operations in the company. Funds help to manage the cooperation with ease. The term business finance refers to daily operations performed in a company. A business requires funds due to reasons like;
Funds are required to set up machinery, furniture, and to run the day to day activities.
They help to purchase necessary types of equipment for increasing the production of goods.
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4. Write the sources of long term finance and short term finance.
There are five types of sources that will help a business to raise funds for the long term. These are-
Equity stocks or shares
Debentures
Retained earnings
Preference shares
Loans from different private and public financial institutions like banks
To raise funds for the short term, there are three types of sources. These are
Commercial papers
Credit cards
Loans taken from banks for a short time
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5. Write the differences between internal and external sources of raising funds.
The differences between internal and external sources of raising funds are-
In internal sources, the funds are generated with the organization itself. Whereas, external sources help to collect funds from outsiders like investors, suppliers, shareholders, etc.
The internal sources of raising funds are sufficient to fulfil the requirements of the company. While the external sources are capable of collecting different links for generating funds.
If a company wants to raise funds from internal sources then they don’t have to deposit any security. Whereas, generating capital from external sources requires security deposits.
6. Write about any three financial institutions along with their functions.
UTI or Unit Trust of India- This trust was established in 1964 under the Unit Trust of India Act in 1963. The aim of this institution is to make investments in businesses to earn profit. It also helps to mobilize savings.
2. LIC or Life Insurance Company of India- It was set up under the LIC Act of 1956. The aim of the organization is to motivate savings towards insurance and investing in industrial units.
IFCI or Industrial Finance Corporation of India- It was set up under the Industrial Finance Corporation Act 1948. Their aim is to strengthen entrepreneurs in the country through financial assistance.
7. Write the differences between GDR and ADR.
GDR- It stands for Global Depository Receipts. They are submitted in global banks by depository banks after a trade of company shares. They are symbolised by US Dollars and can be changed into shares at any time. GDRs can be traded or listed at all stock exchanges throughout the world.
ADR- Also known as American Depository Receipts. US-based organizations are responsible to issue this type of receipt.ADRs can be traded only in the American market. They can’t be used in other countries' markets.