CBSE Class 11 Business Studies Sources of Business Finance MCQs Set 03

Question. Commercial papers can be issued only by large and creditworthy companies because
(a) It is protected by the Government
(b) It is an Unsecured Debt
(c) It is Fully Secured Debt
(d) None of the options

Answer: B

Question. Debentures represent
(a) Fixed capital of the company
(b) Fluctuating capital of the company
(c) Loan capital of the company
(d) Permanent capital of the company

Answer: C

Question. Expand ADR
(a) American Depository Receipts
(b) American Direct Receipts
(c) American Domestic Receipts
(d) None of the options

Answer: A

Question. A person who purchases the common stock of a corporation is known as:
(a) Preferred stockholder
(b) Creditor
(c) Bondholder
(d) Common stockholder

Answer: D

Question. Funds raised through loans and borrowings are ________
(a) Owners Equity
(b) Share Capital
(c) Borrowed funds
(d) None of the options

Answer: C

Question. The maturity period of a commercial paper usually ranges from
(a) 120 to 365 days
(b) 60 to 90 days
(c) 90 to 364 days
(d) 20 to 40 days

Answer: C

Question. _________ is an example of short term finance
(a) Trade Credit
(b) Debenture
(c) Share
(d) None of the options

Answer: A

Question. State Industrial Development Corporations were established by _______
(a) Ministry of Finance
(b) the Different States
(c) Central Government
(d) None of the options

Answer: B

Question. Internal sources of capital are those that are
(a) Generated through outsiders such as suppliers
(b) Generated through the issue of shares
(c) Generated through a loan from commercial banks
(d) Generated within the business

Answer: D

Question. Expand GDR
(a) Global Depository Receipts
(b) Gross Domestic Receipts
(c) Government Direct Receipts
(d) None of the options

Answer: A

Question. When one party grants the other party the right to use the asset in return for a periodic payment, it is known as __________
(a) Lease Financing
(b) Public Deposits
(c) Debts
(d) Factoring

Answer: A

Question. Mention two rights of preference shareholder.
Answer : The two rights of preference shareholder are
- Getting a fixed rate of dividend from the net profit of an organization, before declaring any dividends for equity stockholder.
- At the time of liquidation, receiving funds after the organization creditor’s claim has been resolved.

Question. Give one feature of retained earnings that the other source of finance does not have.
Answer : Retained earnings save a portion of the net incomes for future use is retained earnings. The retained earnings have the ability to self-finance and it doesn’t involve any explicit cost.

Question. Mention one similar function between preference share capital and equity share capital.
Answer : The one similar function between preference share capital and equity share capital are that both capitals are a part of the owner’s share.

Question. Risk capital is defined as which type of capital?
Answer : Risk capital is defined as equity share capital.

Question. In the business sector which organization provides both medium and long term loans and has been set up by both the state and central government.
Answer : The organization which provides both medium and long term loans and has been set up by both the state and central government is the development bank.

Question. Explain the three advantages of retained earnings.
Answer : The three advantages of retained earnings are
- It doesn’t include any direct cost in terms of dividend, interest, and floatation cost.
- It has a flexible operation.
- It increases business capacity to absorb unexpected losses.

Question. Mention two factors the differentiate share and debenture.
Answer : The two factors the differentiate share and debenture are
- Shares/stocks are associated with owner’s fund whereas, a debenture is funds that are borrowed.
- In share, there is a return in interest whereas, a debenture has a fixed rate of interest which is paid to the company.