This quiz works best with JavaScript enabled. Home > Cbse > Class 11 > Commerce > Business Studies > Class 11 Business Studies Chapter 7 Sources Of Business Finance – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 1 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which is not an capital expenditure example A) Furniture & fixtures. B) Rent. C) Computer. D) Buildings. Show Answer Correct Answer: B) Rent. 2. Which other services do financial institutions provide in addition to financial service? A) Service related to listing on stock exchange. B) Arrangement of raw materials. C) Managerial and technical advice. D) Advice on IPO. Show Answer Correct Answer: C) Managerial and technical advice. 3. Which of the following is an example of an internal source of business finance?a) Issuing bondsb) Obtaining a government grantc) Selling company assetsd) Using retained earnings A) C. B) D. C) A. D) B. Show Answer Correct Answer: B) D. 4. Complete the following statements with appropriate word(s) in the blank spaces:3. Preference shares come under the ..... of business. A) Owners. B) Borrowed. C) All the above. D) None of the above. Show Answer Correct Answer: A) Owners. 5. Classify these main benefits and limitations as belonging to either debt finance or equity financeInterest must be paid even when losses are made; the amount raised has to be repaid; and it increases risk A) Limitations of equity financing. B) Limitations of debt financing. C) Benefits of debt financing. D) Benefits of equity financing. Show Answer Correct Answer: B) Limitations of debt financing. 6. What do Angel Investors and Crowdfunders have in common? A) They are incredibly wealthy. B) They charge interest on money invested in the buisness. C) They become part-owners of the business. D) They require something in return for their investment. Show Answer Correct Answer: D) They require something in return for their investment. 7. ADRs are issued in A) China. B) India. C) Canada. D) USA. Show Answer Correct Answer: D) USA. 8. Which of the following is a short-term source of finance? A) Public deposits. B) Lease financing. C) Equity shares. D) Commercial paper. Show Answer Correct Answer: D) Commercial paper. 9. What are retained profits? A) Accumulated profits of a company that have not been distributed to shareholders. B) The total revenue of a company in a given period. C) The amount of money a company has spent on marketing. D) Debts owed by a company to its creditors. Show Answer Correct Answer: A) Accumulated profits of a company that have not been distributed to shareholders. 10. Whataretheownersofprivateandpubliclimitedcompaniescalled? A) Shareholders. B) Stakeholders. C) Managers. D) Board of directors. Show Answer Correct Answer: A) Shareholders. 11. Which of these facts about venture capitalists is NOT true? A) Venture capitalists tend to operate in fairly risky markets. B) Venture capitalists would be paid a share of the profits. C) Venture capitalists usually provide money only and have no interest in running the business. D) Venture capitalists usually invest large sums of money. Show Answer Correct Answer: C) Venture capitalists usually provide money only and have no interest in running the business. 12. Industrial Finance Corporation of India (IFCI) was established in A) July, 1999. B) July, 1948. C) July, 2000. D) July, 1950. Show Answer Correct Answer: B) July, 1948. 13. What is equity financing? A) Equity financing is a method of funding a company through government grants. B) Equity financing is a method of raising capital by taking out a loan. C) Equity financing is a method of borrowing money from a bank. D) Equity financing is a method of raising capital for a company by selling shares of ownership to investors. Show Answer Correct Answer: D) Equity financing is a method of raising capital for a company by selling shares of ownership to investors. 14. Which capital is known as risk capital? A) Preference share capital. B) Equity share capital. C) All the above. D) None of the above. Show Answer Correct Answer: B) Equity share capital. 15. What do venture capitalists usually expect in return for investment? A) A guaranteed refund. B) No involvement in the business. C) A share of profits and influence. D) Total ownership of the business. Show Answer Correct Answer: C) A share of profits and influence. 16. 10 A flower seller plans to increase inventories of plants before a major festival. Which of the following is the most likely source of finance? 1) Bank overdraft 2) Leasing 3) Share issue 4) Debentures A) . B) . C) . D) . Show Answer Correct Answer: A) . 17. Which source of finance is exclusively available to limited companies? A) Crowdfunding. B) Bank loans. C) Trade credit. D) Share issues. Show Answer Correct Answer: D) Share issues. 18. Funds required for purchasing current assets is an example of A) Lease financing. B) Working capital requirement. C) Ploughing back of profit. D) Fixed capital requirement. Show Answer Correct Answer: B) Working capital requirement. 19. This type of finance does not need to be repaid. A) Overdraft. B) Mortgage. C) Government Grant. D) Bank Loan. Show Answer Correct Answer: C) Government Grant. 20. Which is an advantage of crowdfunding? A) It requires no public interest. B) It involves no time pressure. C) It guarantees funding. D) It acts as market research. Show Answer Correct Answer: D) It acts as market research. 21. Retained earnings are also known as ..... A) Ploughing back of profits. B) Capital. C) Surplus profit. D) Gross profit. Show Answer Correct Answer: A) Ploughing back of profits. 22. Which of the following is the factor afffecting the choice of the source of funds A) Coats. B) Form of organisation. C) Both of the Above. D) None of the Above. Show Answer Correct Answer: C) Both of the Above. 23. The funds which are required to purchase land, building and furniture comes under: A) Further capital requirement. B) Finance capital requirement. C) Fixed capital requirement. D) Working capital requirement. Show Answer Correct Answer: C) Fixed capital requirement. 24. A rights issue involves the sale of of what? A) Part of the business. B) New shares to existing shareholders. C) Fixed Assets. D) New shares on the stock market. Show Answer Correct Answer: B) New shares to existing shareholders. 25. Who among the following is called the owner of the company? A) Employees. B) Directors. C) Debenture holders. D) Equity Shareholders. Show Answer Correct Answer: D) Equity Shareholders. 26. What is the predicted flow of cash into and out of a business over a period of time known as? A) Operating profit. B) Historical budgeting. C) Cash-flow forecasts. D) Adverse variance. Show Answer Correct Answer: C) Cash-flow forecasts. 27. What is short-term financing? A) Investing money for a long period of time to meet future financial needs. B) Receiving a grant from the government to fund a business venture. C) Borrowing money for a short period of time to meet immediate financial needs. D) Using personal savings to cover immediate financial needs. Show Answer Correct Answer: C) Borrowing money for a short period of time to meet immediate financial needs. 28. What is the most likely source of finance for a small firm? A) A debenture. B) Issuing shares. C) A bank loan. D) None of the above. Show Answer Correct Answer: C) A bank loan. 29. Which of the following constitutes of source for medium term finance A) Borrowings from commercial banks. B) Preference shares. C) Retained earnings. D) All of the above. Show Answer Correct Answer: A) Borrowings from commercial banks. 30. A long-term external source of finance usually at a fixed rate of interest A) Debt factoring. B) Mortgage. C) Debenture. D) None of the above. Show Answer Correct Answer: C) Debenture. 31. The initial capital contributed by the entrepreneur is suffiecient to take care of all financial requirements of the business. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 32. How do financial institutions make most of their money? A) Loan Payments. B) Mutual Funds. C) Fees. D) Interest. Show Answer Correct Answer: D) Interest. 33. What are the sources of Capital? A) Internal and External. B) Debt Financing and Equity Financing. C) Asset and Liabilities. D) Liabilities and Equity. Show Answer Correct Answer: A) Internal and External. 34. The IDBI was established in Factoring A) Factoring. B) Forfaiting. C) Both a & b. D) None. Show Answer Correct Answer: A) Factoring. 35. What is the primary risk associated with borrowed funds? A) Interest payments must be made regardless of profit. B) High operational costs. C) No control over business. D) Dilution of ownership. Show Answer Correct Answer: A) Interest payments must be made regardless of profit. 36. Short term sources of finance are paid back within ..... A) Six months. B) One year. C) Two years. D) Five years. Show Answer Correct Answer: B) One year. 37. Debt Factoring is: A) Factoring the amount of debt you have into your business plan. B) Selling invoices to a factoring company. C) Writing off the debt that a business owe you. D) Making plans for the future of the business. Show Answer Correct Answer: B) Selling invoices to a factoring company. 38. To which of the following businesses might a supplier be reluctant to issue trade credit? A) A new business start-up. B) A successful franchise. C) An established and thriving partnership. D) A highly profitable and reputable private limited company. Show Answer Correct Answer: A) A new business start-up. 39. Overdrafts, Bank Loans, Mortgages, Debentures, Venture Capital, Share or Equity Capital, Crowdfunding, Government Grants and Loans A) Internal sources of finance. B) External sources of finance. C) All the above. D) None of the above. Show Answer Correct Answer: B) External sources of finance. 40. Which one of the following is NOT a limitation of raising funds through debentures? A) No dilution of control. B) Charge on assets. C) Fixed obligation. D) All of these. Show Answer Correct Answer: A) No dilution of control. 41. In which would you normally own an asset at the end? A) Leasing. B) Hire Purchase. C) All the above. D) None of the above. Show Answer Correct Answer: B) Hire Purchase. 42. What is ONE method of controlling current liabilities? A) Selling accounts receivable at a discount. B) Having a tight policy on allowing trade credit. C) Making interest and loan repayments on time. D) Offering discounts for cash and early payment. Show Answer Correct Answer: C) Making interest and loan repayments on time. 43. What is an advantage of owners' funds? A) There will be little or no interest. B) You can pay in smaller installments. C) They take a long time to arrange. D) You don't have to pay it back. Show Answer Correct Answer: D) You don't have to pay it back. 44. An established seasonal partnership is experiencing cash flow problems during the winter months. Which of the following would be a suitable source of finance to overcome this problem? A) Share capital. B) Venture capital. C) Crowdfunding. D) Overdraft. Show Answer Correct Answer: D) Overdraft. 45. Preference shares and debentures comes under the category of: A) Short term funds. B) External source of funds. C) Long term funds. D) Both external source of funds & long term funds.s. Show Answer Correct Answer: D) Both external source of funds & long term funds.s. 46. Debentures represent A) Fixed capital of a company. B) Loan capital of a company. C) Owners of the company. D) Guardian of the company. Show Answer Correct Answer: B) Loan capital of a company. 47. Which of the following is considered an external source of business finance? A) Loans from banks or financial institutions. B) Venture capital. C) Personal savings. D) Crowdfunding. Show Answer Correct Answer: A) Loans from banks or financial institutions. 48. A flower seller plans to increase stocks of plants. Which is the most likely source of finance? A) Debentures. B) Bank overdraft. C) Share issue. D) Leasing. Show Answer Correct Answer: B) Bank overdraft. 49. What is the primary source of business finance from a bank called? A) Stock investment. B) Credit card. C) Savings account. D) Loan. Show Answer Correct Answer: D) Loan. 50. Equity shareholders are the: A) Owners of the company. B) Guardian of the company. C) Partners of the company. D) Executive of the company. Show Answer Correct Answer: A) Owners of the company. 51. What is the primary role of the financial manager in an organization's fund flow? A) Allocating resources to marketing activities. B) Allocating financial resources to different departments. C) Managing human resources within the organization. D) Making operational decisions. Show Answer Correct Answer: B) Allocating financial resources to different departments. 52. 15 A business has applied for a bank loan to buy new computers. A bank manager is most likely to ask all of the following questions before granting the loan except:1) How big is the loan needed? 2) How many loans has the business already obtained? 3) How long will the loan be needed for? 4) How powerful are the computers? A) . B) . C) . D) . Show Answer Correct Answer: A) . 53. What is NOT a source of Internal finance? A) Retained profit. B) Sale of existing assets. C) Issue of shares. D) All are sources of Internal finance. Show Answer Correct Answer: C) Issue of shares. 54. On the basis of period funds are classified into ..... types: A) 5. B) 3. C) 2. D) 4. Show Answer Correct Answer: B) 3. 55. What type of capital is required for purchasing fixed assets? A) Trade credit. B) Fixed capital. C) Working capital. D) Retained earnings. Show Answer Correct Answer: B) Fixed capital. 56. Which of the following is classed as a short-term source of finance? A) Personal savings. B) Retained profit. C) Venture Capital. D) Trade credit. Show Answer Correct Answer: D) Trade credit. 57. Though banks have started extending loans for ..... Periods, generally such loans are used for ..... Periods. A) Long, medium. B) Short, long. C) Medium, short. D) Long, short. Show Answer Correct Answer: D) Long, short. 58. What is revenue expenditure? A) Money spent on monthly expenses. B) Money spent on hour to hour expenses. C) Money spent on day to day expenses. D) None of the above. Show Answer Correct Answer: C) Money spent on day to day expenses. 59. Retained earnings does not involve any cost in the form of A) Dividend. B) Interest. C) Floatation cost. D) All of these. Show Answer Correct Answer: D) All of these. 60. Financial institutions aim at promoting the industrial development of a country, these are also called A) Urban bank. B) Children bank. C) Rural bank. D) Development bank. Show Answer Correct Answer: D) Development bank. 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