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 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 2 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which source of finance does not need to be repaid? A) Debentures. B) Government grants. C) Trade credit. D) Bank overdrafts. Show Answer Correct Answer: B) Government grants. 2. Acid test ratio is a more severe test of liquidity because A) It includes stock. B) It excludes stock. C) It includes costs. D) It excludes costs. Show Answer Correct Answer: B) It excludes stock. 3. Who is the person in charge of a business's financial planning? A) Financial Manager. B) Financial Overseer. C) Financial Accountant. D) Mr. Morrise and his Basic Math Skills. Show Answer Correct Answer: A) Financial Manager. 4. While evaluating capital investment proposal, the time value of money is considered in case of, A) ARR method. B) Discounted Cash flow method. C) Pay-back method. D) All. Show Answer Correct Answer: B) Discounted Cash flow method. 5. Under the lease agreement, the lessee gets the right to A) Use the asset for a specified period. B) Share profits earned by the lesser. C) Participate in the management of the organization. D) Sell the assets. Show Answer Correct Answer: A) Use the asset for a specified period. 6. Long Term sources of finance are for when the time needed to pay the money back is more than ..... A) 5 years. B) 6 months. C) 10 years. D) 1 year. Show Answer Correct Answer: D) 1 year. 7. Which of the following is called ''Risk Capital" ? A) Retained earnings. B) Debentures. C) Equity shares. D) Preference shares. Show Answer Correct Answer: B) Debentures. 8. What factors should be considered when choosing between equity and debt financing? A) Company size, location, and industry sector. B) Cost of capital, control and ownership, risk tolerance, financial flexibility, and stage and growth potential of the business. C) Personal credit score, business plan, and revenue projections. D) Interest rates, market conditions, and industry trends. Show Answer Correct Answer: B) Cost of capital, control and ownership, risk tolerance, financial flexibility, and stage and growth potential of the business. 9. Commercial Banks do not provide loans in the form of: A) Term loans. B) Overdraft. C) Reserves. D) Cash Credits. Show Answer Correct Answer: C) Reserves. 10. Which source of finance is preferred by investors who want fixed income at lesser risk A) Debentures. B) Bank loan. C) Preference shares. D) Equity shares. Show Answer Correct Answer: A) Debentures. 11. If total cost is US$ 350 000 000 and output is 100 000 units what is average cost? A) US$ 100 000. B) US$ 350. C) US$ 3500. D) US$ 35. Show Answer Correct Answer: C) US$ 3500. 12. The maturity period of a commercial paper usually ranges from A) 60 to 90 days. B) 20 to 40 days. C) 90 to 364 days. D) 120 to 365 days. Show Answer Correct Answer: C) 90 to 364 days. 13. Which of the following is true in the context of owner's fund? A) The amount is contributed by owners. B) The amount is borrowed from banks. C) The rate of interest is fixed on funds. D) None of the above. Show Answer Correct Answer: A) The amount is contributed by owners. 14. Debenture holders A) Receive payments from companies before any shareholders. B) Are represented as current liabilities on the company's balance sheet. C) Are paid a return from the profits of the company. D) Own a part of the company in which they hold debentures. Show Answer Correct Answer: A) Receive payments from companies before any shareholders. 15. What is an advantage of owner's capital? A) There will be 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. 16. Which is a short-term source of finance? A) Share issues. B) Long-term loans. C) Trade credit. D) Debentures. Show Answer Correct Answer: C) Trade credit. 17. What are the main short-term sources of finance? A) Bank overdrafts and venture capital. B) Bank loans and creditors from suppliers. C) Debt factoring and trade credit. D) Micro-finance and grants from government agencies. Show Answer Correct Answer: B) Bank loans and creditors from suppliers. 18. The procedure of applying for loan in a financial institution is time consuming and expensive ..... A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 19. It is the science that describes the management, creation and study of money, banking, credit, investments assets and liabilities. A) Management. B) Economics. C) Finance. D) Accounting. Show Answer Correct Answer: C) Finance. 20. What are the main responsibilities of banks? A) To attend creditors' meetings if the business is put into liquidation. B) To receive interest payments as laid down in the loan or overdraft agreement. C) To check on business viability before loan or overdraft is agreed. D) To provide credit encourage the business to purchase stock. Show Answer Correct Answer: C) To check on business viability before loan or overdraft is agreed. 21. Short term finance is usually paid back no longer than A) 1 year. B) 6 months. C) 1 month. D) 5 years. Show Answer Correct Answer: A) 1 year. 22. Trade Payable is a suitable source of finance to fund the purchase of what? A) Property. B) Inventories. C) Direct labour. D) A New delivery vehicle. Show Answer Correct Answer: B) Inventories. 23. In which type of business finance are debentures included? A) Long term source. B) Short term source. C) Medium term source. D) None of the above. Show Answer Correct Answer: A) Long term source. 24. What is the role played by the main financial institutions? A) To increase the liabilities or debts of the business. B) To reduce the cost of financing for businesses. C) To provide advice, contacts, and experience to small to medium-sized businesses. D) To manage the day-to-day operations of the business. Show Answer Correct Answer: C) To provide advice, contacts, and experience to small to medium-sized businesses. 25. What happens if you do not pay a credit card bill on time? A) Pay interest. B) Declare bankrupty. C) Use your debit card. D) You go into debt. Show Answer Correct Answer: A) Pay interest. 26. Assertion:Equity share capital act as a permanent source of capital for the businessReason:equity capital is to be repaid at the time of liquidation of a company A) Both assertion (A) and reason(R) are true and reason(R) is the correct explanation of assertion. B) Both Assertion (A) and Reason (R) is not the correct explanation of assertion (A). C) Assertion (A) is true but reason (R) is false. D) Assertion (A) is false but reason (R) is true. Show Answer Correct Answer: A) Both assertion (A) and reason(R) are true and reason(R) is the correct explanation of assertion. 27. What is a source of finance? A) A method of earning incomes. B) The different ways a business can fund themselves. C) All the above. D) None of the above. Show Answer Correct Answer: A) A method of earning incomes. 28. Trade credit is example of A) Long term finance. B) Medium term finance. C) Short term finance. D) All of the above. Show Answer Correct Answer: B) Medium term finance. 29. What is crowdfunding? A) A government grant for large firms only. B) A high-interest loan from banks. C) Raising money from many small investors online. D) Selling shares on the stock market. Show Answer Correct Answer: C) Raising money from many small investors online. 30. Equity Shareholders are called A) Partners of the Company. B) Guardian of the Company. C) Executive of the Company. D) Owners of the Company. Show Answer Correct Answer: D) Owners of the Company. 31. What is the primary reason retained earnings are considered a cost-free source of finance? A) They are a tax-deductible source. B) They do not involve any legal compliance. C) They have no explicit cost. D) They do not dilute ownership. Show Answer Correct Answer: C) They have no explicit cost. 32. Public deposits are the deposits that are raised directly from A) The auditors. B) The owners. C) The directors. D) The public. Show Answer Correct Answer: D) The public. 33. A business can have better control over its cash flow if it: A) Operates an efficient credit control system. B) Keeps up to date records of financial transactions. C) Always plans ahead by producing a cash flow forecast. D) Pays all of its bills on time. Show Answer Correct Answer: D) Pays all of its bills on time. 34. Which is an example of an internal source of finance? A) Trade credit. B) Owner's Capital. C) Venture Capitalist. D) Overdraft. Show Answer Correct Answer: B) Owner's Capital. 35. Buying tables and chairs for a new cafe would be a ..... A) One-Off Cost. B) Start Up Cost. C) New Business Cost. D) Running Cost. Show Answer Correct Answer: B) Start Up Cost. 36. External sources of finance do not include A) Retained earnings. B) Debentures. C) Overdrafts. D) Leasing. Show Answer Correct Answer: A) Retained earnings. 37. Preference shareholders are called: A) Owners of the company. B) Partners of the company. C) Executives of the company. D) Guardians of the company. Show Answer Correct Answer: A) Owners of the company. 38. Which individual in an organization is responsible for analyzing financial data and making recommendations for investment decisions? A) COO. B) CEO. C) CMO. D) CFO. Show Answer Correct Answer: D) CFO. 39. What is the role of venture capital financing in business? A) It involves obtaining funds from banks and financial institutions. B) It is used to meet short-term financial needs of a business. C) It is a method of raising capital by selling shares of a company to investors. D) It is a method of reducing company expenses. Show Answer Correct Answer: C) It is a method of raising capital by selling shares of a company to investors. 40. What are internal sources of business finance? A) Stock issuance, angel investors, and factoring. B) Retained earnings, sale of assets, and depreciation funds. C) Government grants, personal savings, and trade credit. D) Bank loans, venture capital, and crowdfunding. Show Answer Correct Answer: B) Retained earnings, sale of assets, and depreciation funds. 41. Funds raised through loans or borrowings are ..... A) Borrowed funds. B) Owners Equity. C) Share Capital. D) None of these. Show Answer Correct Answer: A) Borrowed funds. 42. Bills of exchange is an instrument of ..... A) ICD. B) Trade credit. C) Loan. D) None of these. Show Answer Correct Answer: B) Trade credit. 43. What are long-term funds? A) Funds borrowed for a short period. B) Funds raised for day-to-day operations. C) Funds raised for a period longer than one year. D) None of the above. Show Answer Correct Answer: C) Funds raised for a period longer than one year. 44. When the bank allows you to withdraw more money from your current account than you have in it, this is a A) Accrued Expense. B) Factoring Debt. C) Trade Creditor. D) Bank Overdraft. Show Answer Correct Answer: D) Bank Overdraft. 45. Which of the following is a disadvantage of equity shares as a source of long-term finance? A) Involves interest payments. B) Must be repaid within a year. C) High risk for shareholders. D) Dilutes ownership of the company. Show Answer Correct Answer: D) Dilutes ownership of the company. 46. Unit Trust of India was established by ..... A) Indian Government. B) HDFC Bank. C) ICICI. D) State Bank Group. Show Answer Correct Answer: A) Indian Government. 47. 1 Which of the following is not a reason why a business needs money? 1) To start the business 2) To expand the business 3) To deal with a negative cash-flow problem 4) To increase prices of its products A) . B) . C) . D) . Show Answer Correct Answer: A) . 48. Are items owned by a business that can be readily turned into cash. Examples include cash, money owed by customers and inventories. A) Working capital. B) Current assets. C) Current liabilities. D) None of the above. Show Answer Correct Answer: B) Current assets. 49. Classify these main benefits and limitations as belonging to either debt finance or equity financeDoes not affect ownership of the business; and lenders have no say in the running of the business. A) Limitations of equity financing. B) Limitations of debt financing. C) Benefits of equity financing. D) Benefits of debt financing. Show Answer Correct Answer: D) Benefits of debt financing. 50. Which type of financing is used to meet the short-term financial needs of a business? A) Personal savings. B) Venture capital. C) Short-term financing. D) Long-term financing. Show Answer Correct Answer: C) Short-term financing. 51. Which of the following is not a fixed capital requirement: A) Purchase of Raw Material. B) Purchase of Machinery. C) Purchase of Furniture. D) Purchase of Machinery. Show Answer Correct Answer: A) Purchase of Raw Material. 52. Which of the following is an advantage of retained profit as a source of finance? A) It increases owner's share immediately. B) No interest payments required. C) It's available to new businesses. D) It's quick to arrange. Show Answer Correct Answer: B) No interest payments required. 53. Who are known as residual owners A) Debentureholders. B) Equity shareholders. C) Preference shareholders. D) None of the above. Show Answer Correct Answer: B) Equity shareholders. 54. Which long-term funding option involves a company issuing shares to the public? A) Venture capital. B) Initial Public Offering (IPO). C) Debentures. D) Term loan. Show Answer Correct Answer: B) Initial Public Offering (IPO). 55. Which of the following is paid after tax: A) Interest. B) Dividend. C) Salary. D) Commission. Show Answer Correct Answer: B) Dividend. 56. Which of the following is NOT a source of borrowed funds? A) Debentures. B) Retained earnings. C) Trade credit. D) Bank loans. Show Answer Correct Answer: B) Retained earnings. 57. "The maximum amount of credit available to the business" best describes which common term of a credit agreement? A) Credit limit. B) Credit period. C) Credit amount. D) Credit frequency. Show Answer Correct Answer: A) Credit limit. 58. A business is likely to have sufficient working capital if the current ratio is between? A) 0 and 1. B) 1 and 2. C) 1.5 and 2. D) 2 and 3. Show Answer Correct Answer: C) 1.5 and 2. 59. He need for funds arises from the stage when an entrepreneur makes a decision to start a business. Some funds are needed immediately for the purchase of Plant and machinery, furniture, etc.Identify the category of financial needs of a business highlighted above. A) Initial capital requirements. B) Fixed capital requirements. C) Long-term capital requirements. D) Working capital requirements. Show Answer Correct Answer: B) Fixed capital requirements. 60. Fixed capital means the capital which is used in purchasing ..... ASSETS A) Current assets. B) Fixed assets. C) Material. D) All the above. Show Answer Correct Answer: B) Fixed assets. ← PreviousNext →Related QuizzesCommerce QuizzesClass 11 QuizzesClass 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 1Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 3Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 4Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 5Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 6Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 7Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 8Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books