Question 1

Which of the following is considered as 'owner's funds' in business finance?

Accepted Answer

Equity shares are considered owner's funds because equity shareholders are the owners of the company and bear the ultimate risk of the business. They provide permanent capital and do not carry a fixed rate of return.

Question 2

Funds required for a period exceeding 5 years are classified as:

Accepted Answer

Long-term finance refers to capital required for a period exceeding 5 years, typically used for purchasing fixed assets or major business expansion.

Question 3

Which source of finance is also known as 'ploughing back of profits'?

Accepted Answer

Retained earnings refer to the undistributed profits of a business that are reinvested back into the company, commonly known as ploughing back of profits.

Question 4

Debenture holders of a company are its:

Accepted Answer

Debenture holders provide borrowed funds to the company and therefore they are the creditors of the company, receiving a fixed rate of interest.

Question 5

Which financial instrument represents a certificate of deposit issued by a bank?

Accepted Answer

A Certificate of Deposit (CD) is an unsecured, negotiable instrument issued by commercial banks against term deposits.

Sources of Business Finance