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 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 11 Business Studies Chapter 7 Sources Of Business Finance Quiz 3 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. ..... is granted to those customers who have reasonable amount of financial standing and goodwill. A) Trade credit. B) Reserves. C) Overdraft. D) None of these. Show Answer Correct Answer: A) Trade credit. 2. Classify each source of finance as either internal or externalShare issue A) Internal. B) External. C) All the above. D) None of the above. Show Answer Correct Answer: B) External. 3. This is the cash generated by the business when it operates successfully A) Share capital. B) Owner savings. C) Retained earnings. D) Angel investor. Show Answer Correct Answer: C) Retained earnings. 4. Internal sources of capital are those that are A) Generated through outsiders such as suppliers. B) Generated through issue of shares. C) Generated whithin the business. D) Generated through loan from commercial banks. Show Answer Correct Answer: C) Generated whithin the business. 5. Preference shares A) Are not part of a company's share capital. B) Receive dividends. C) Have no voting rights. D) Are not allowable for corporation tax. Show Answer Correct Answer: C) Have no voting rights. 6. Assertion:the importance of business finances increased tremendously these days. Reason:goods are produced on large scale and capital intensive techniques are used. 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. 7. Complete the following statements with appropriate word(s) in the blank spaces:7 ..... are creditors of a company. A) Debenture holders. B) Shareholders. C) All the above. D) None of the above. Show Answer Correct Answer: A) Debenture holders. 8. What is the main advantage of bank overdraft as a source of finance? A) No interest has to be paid. B) The business can benefit from the asset without purchasing it. C) No need for collaterals or security. D) More flexible and the overdraft amount can be adjusted every month according to needs. Show Answer Correct Answer: D) More flexible and the overdraft amount can be adjusted every month according to needs. 9. An advantage that share capital (equity capital) has over long-term loans is that: A) Dividends are paid before tax. B) The balance of control in the business will change. C) The rate of interest on shares is fixed. D) The capital never has to be repaid. Show Answer Correct Answer: D) The capital never has to be repaid. 10. Public deposit is a cheaper source of finance A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 11. Which type of funds are equity linked debt securities that are to be converted in to equity or depository receipts after a specific period A) Equity shares. B) ADR. C) GDR. D) Foreign currency convertible bonds. Show Answer Correct Answer: D) Foreign currency convertible bonds. 12. If you hear the word "finance", what comes into your mind? A) Money. B) Bank. C) ATM. D) Treasurer. Show Answer Correct Answer: A) Money. 13. The oldest bank in India is: A) Canara Bank. B) SBI. C) RBI. D) PNB. Show Answer Correct Answer: B) SBI. 14. Which of the following statements about overdrafts is not true? A) Short term source of finance. B) It's really a small, short term loan. C) It's flexible, in that it can be used whenever it is needed. D) Cheap-the interest rate is usually lower than that of a long-term bank loan. Show Answer Correct Answer: D) Cheap-the interest rate is usually lower than that of a long-term bank loan. 15. Which source of business finance involves borrowing funds that need to be repaid with interest? A) Angel investment. B) Debt financing. C) Venture capital. D) Equity financing. Show Answer Correct Answer: B) Debt financing. 16. Which of the following denotes the feature of Indian Depository Receipt: A) It is issued only to American citizens. B) It is purchased and sold only by NRI's. C) It is traded in American Stock Exchange. D) It is issued to Indian citizens only. Show Answer Correct Answer: D) It is issued to Indian citizens only. 17. Which source of finance involves the entrepreneur using their own money? A) Venture capital. B) Bank loan. C) Share capital. D) Personal savings. Show Answer Correct Answer: D) Personal savings. 18. Classify these main benefits and limitations as belonging to either debt finance or equity financeOwnership and control are diluted; and it can be expensive to raise finance this way A) Benefits of equity financing. B) Benefits of debt financing. C) Limitations of equity financing. D) Limitations of debt financing. Show Answer Correct Answer: C) Limitations of equity financing. 19. A company issues equity shares during a recession. Which of the following challenges is most likely to arise? A) Reduced cost of capital. B) Difficulty in raising sufficient funds. C) Risk of ownership concentration. D) High dividend obligation. Show Answer Correct Answer: B) Difficulty in raising sufficient funds. 20. Why is retained earning an uncertain source? A) Profits are fluctuating. B) Profits are fixed. C) Profits are less. D) Shareholders are dissatisfied. Show Answer Correct Answer: A) Profits are fluctuating. 21. Which source of short-term finance allows a business to borrow only when needed? A) Share capital. B) Venture capital. C) Retained profit. D) Overdraft. Show Answer Correct Answer: D) Overdraft. 22. A rise in the general level of prices is called? A) Inflation. B) Deflation. C) Regression. D) Recession. Show Answer Correct Answer: A) Inflation. 23. What is the importance of working capital for a business? A) It is more than just cash and is needed to pay short term debts. B) It includes debtors and stock. C) It allows businesses to pay for operations and to reinvest in their growth and development. D) It provides an indication of the health of the business. Show Answer Correct Answer: A) It is more than just cash and is needed to pay short term debts. 24. If variable cost is £10 per units and fixed costs are £400 000, what is the total cost of producing 50 000 units? A) £50 000. B) £900 000. C) £4 0000 0000. D) £450 000. Show Answer Correct Answer: B) £900 000. 25. Which business firm will require more working capital, the firm having slow sales turnover or the firm having high sales turnover? A) Slow sales turnover. B) High sales turnover. C) All the above. D) None of the above. Show Answer Correct Answer: A) Slow sales turnover. 26. Which type of source of business finance is typically used for short-term needs? A) Trade credit, bank overdrafts, short-term loans. B) Mortgage loans. C) Long-term bonds. D) Venture capital. Show Answer Correct Answer: A) Trade credit, bank overdrafts, short-term loans. 27. The credit extended by one trader to another for purchasing goods or services is known as A) Business credit. B) Commerce credit. C) Trade credit. D) Cash Credit. Show Answer Correct Answer: C) Trade credit. 28. A firm has applied for a bank loan. The manager will ask all of the following questions except: A) How powerful are the computers?. B) How big is the loan needed?. C) How long will the loan be needed for?. D) How liquid is the business?. Show Answer Correct Answer: A) How powerful are the computers?. 29. Read each of the following statements and write if it is true or false:1. For the routine/daily requirements of business there is a need for the long-term finance. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 30. What is business finance primarily concerned with? A) Acquisition and conservation of capital funds. B) Employee management. C) Marketing strategies. D) Product development. Show Answer Correct Answer: A) Acquisition and conservation of capital funds. 31. Fixed Deposits are A) Short term source of finance. B) Medium term source of finance. C) Long term source of finance. D) None of the above. Show Answer Correct Answer: B) Medium term source of finance. 32. Which one of the following is not a feature of debentures? A) Specified maturity period. B) Variable return. C) Long term debt instruments. D) No voting right. Show Answer Correct Answer: B) Variable return. 33. Type of stock owned by voting members A) Preferred. B) Income. C) Common. D) Growth. Show Answer Correct Answer: C) Common. 34. Investor who want steady income may not prefer-? A) Preference shares. B) Bonds. C) Equity shares. D) Debentures. Show Answer Correct Answer: C) Equity shares. 35. When a bank asks for 'security' before agreeing to a bank loan it means that: A) The offices must be securely locked at night. B) Firm assets will be sold by the bank if the loan isn't paid. C) The assets purchased must be insured. D) None of the above. Show Answer Correct Answer: B) Firm assets will be sold by the bank if the loan isn't paid. 36. 'Opportunity cost' is related to ..... A) Equity shares. B) Retained earnings. C) Debentures. D) Preference shares. Show Answer Correct Answer: B) Retained earnings. 37. Why commercial papers can be issued only by large and creditworthy companies? A) It is an unsecured debt. B) It is fully secured debt. C) It is protected by government. D) None of these. Show Answer Correct Answer: A) It is an unsecured debt. 38. Which of the following is a characteristic of equity shares? A) No voting rights. B) Guaranteed returns. C) Fixed dividend payment. D) Ownership in the company. Show Answer Correct Answer: D) Ownership in the company. 39. Owner's fund does not refer to the funds invested by the company owners for its development. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 40. The term for medium term source of finance ranges from A) 0-5 years. B) 1-5 years. C) 6-10 years. D) None of these. Show Answer Correct Answer: B) 1-5 years. 41. What is start up capital? A) Finance needed before starting trading. B) Finance paid after trading. C) Finance paid to banks. D) None of the above. Show Answer Correct Answer: A) Finance needed before starting trading. 42. A recruitment agency floats itself on the stock market. This means that A) It borrows money from the stock market. B) It recruits workers from the stock exchange. C) Its sales increase. D) Its share are available to buy on the stock market. Show Answer Correct Answer: D) Its share are available to buy on the stock market. 43. Which of the following is an advantage of issuing preference shares over equity shares? A) Dividends on preference shares are fixed. B) Preference shareholders receive dividends after equity shareholders. C) Preference shares increase the debt ratio of the company. D) Preference shareholders have voting rights. Show Answer Correct Answer: A) Dividends on preference shares are fixed. 44. What is the difference between loans and shares? A) Loans mean borrowing money from banks and other financial lenders. B) Loans are high risk as more loans mean more debt interest must be paid even if the business doesn't make any profit. C) Shareholders will want a share of the profits at some point (dividend). D) Selling shares mean selling some of the ownership of a business. Show Answer Correct Answer: A) Loans mean borrowing money from banks and other financial lenders. 45. Which one of the following is a definition of the term 'break-even level of output' A) The level of output at which total variable costs = total fixed costs. B) The level of output at which total profit = total costs. C) The level of output at which total fixed costs = total revenue. D) The level of output at which total revenue = total costs. Show Answer Correct Answer: D) The level of output at which total revenue = total costs. 46. The offering of new shares by the company in the primary market to the existing shareholders is known as A) Right issue. B) Private placement. C) Preferential share. D) None. Show Answer Correct Answer: A) Right issue. 47. DEMAND DEPOSITS: A) B.Money in checking accounts that the firm can pay out immediately. B) C.Money in saving accounts. C) D.Unpaid bills from sales to other companies. D) None of the above. Show Answer Correct Answer: A) B.Money in checking accounts that the firm can pay out immediately. 48. What is a characteristic of hire purchase? A) No initial deposit required. B) Monthly installments include interest. C) Immediate full ownership. D) No maintenance costs. Show Answer Correct Answer: B) Monthly installments include interest. 49. ....is the most important source of raising long term capital by the company. A) Commercial paper. B) Equity shares. C) Financial institutions. D) Commercial banks. Show Answer Correct Answer: B) Equity shares. 50. What is a major limitation of retained earnings? A) It is a guaranteed source of income. B) It may cause dissatisfaction among shareholders. C) It is a permanent source of funds. D) It is easy to access. Show Answer Correct Answer: B) It may cause dissatisfaction among shareholders. 51. Nvestors who want steady income may not prefer ..... A) Debentures. B) Equity Shares. C) Bonds. D) Both A and C. Show Answer Correct Answer: B) Equity Shares. 52. When using Hire Purchase, the business does not own the item ..... A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 53. A financial statement showing a business's sales revenue over a trading period and all the relevant costs incurred to generate that revenue. A) Capital Expenditure. B) Revenue Expenditure. C) Statement of Financial Position (used to be called Balance Sheet). D) Income Statement. Show Answer Correct Answer: D) Income Statement. 54. Businesses can use profits from the current trading year or profits of previous trading years as sources of finance. A) Retained Profit. B) Sale of Unwanted Assets. C) Sale and Leaseback. D) None of the above. Show Answer Correct Answer: A) Retained Profit. 55. The part of capital raised from owners of the company is known as: A) Retained Earnings. B) Bond. C) Share. D) Debenture. Show Answer Correct Answer: C) Share. 56. Why might a bank require collateral for a loan? A) To stop the business from using retained profit. B) To increase the loan amount available. C) To guarantee shareholder approval. D) To reduce the bank's level of risk. Show Answer Correct Answer: D) To reduce the bank's level of risk. 57. Classify each source of finance as either internal or externalSale of unwanted non-current assets A) Internal. B) External. C) All the above. D) None of the above. Show Answer Correct Answer: A) Internal. 58. What is an advantage of a bank loan? A) Repayment burden. B) Has lower interest rates compared to credit cards. C) Requires a partial funding requirement. D) Businesses need meet a range of requirements before being accepted for the loan. Show Answer Correct Answer: B) Has lower interest rates compared to credit cards. 59. Profit is important to businesses because: A) Businesses need to pay taxes to the government. B) It improves businesses, cash balances. C) It can be used to measure business size. D) It is a measure of businesses, success. Show Answer Correct Answer: D) It is a measure of businesses, success. 60. Business finance is needed to A) Establish a business. B) Run a business. C) Expand a business. D) All of the above. Show Answer Correct Answer: D) All of the above. ← 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 2Class 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