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CBSE · Class 11 · Business Studies

Sources of Business Finance

Standard difficulty · 20 questions · 40 marks · Time: 38 minutes

Name: Date: Score: ____ / 40

Show your working for Sections B and C. Answers are on the last page — try every question first!

Section A — Choose the correct answer8 × 1 = 8 marks
1.
The part of profit kept in the business instead of being distributed is:
  1. commercial paper
  2. public deposit
  3. trade credit
  4. retained earnings
2.
What is meant by “lease financing”?
  1. paying rent to use an asset owned by another
  2. shares with a fixed dividend paid before equity
  3. instruments of debt with a fixed rate of interest
  4. a short-term unsecured promissory note
3.
A firm keeps back this year’s profit to buy new machines. Which source of finance is being used?
  1. financial institutions
  2. trade credit
  3. retained earnings
  4. factoring
4.
Which of these is part of owner’s funds?
  1. preference shares
  2. public deposits
  3. trade credit
  4. debentures
5.
Which of these is a medium term source of finance?
  1. equity shares
  2. factoring
  3. lease financing
  4. trade credit
6.
A company has issued 41,000 debentures of ₹100 each at 11% interest. How much interest does it pay each year?
  1. ₹451,000
  2. ₹225,500
  3. ₹902,000
  4. ₹4,100,000
7.
A company has 30,000 preference shares of ₹100 each carrying a 8% dividend. What is the yearly preference dividend?
  1. ₹480,000
  2. ₹240,000
  3. ₹3,000,000
  4. ₹24,000
8.
A firm sells receivables of ₹1,400,000 to a factor, who pays 90% in advance. How much does the firm receive at once?
  1. ₹140,000
  2. ₹1,400,000
  3. ₹1,260,000
  4. ₹1,399,910
Section B — Short answer8 × 2 = 16 marks
9.
What is meant by business finance?
10.
Explain each term: (a) debentures (b) preference shares
11.
Name the source of finance in each case. (a) A company raises permanent capital by issuing ownership shares. (b) A company raises funds abroad by issuing depository receipts.
12.
Is each owner’s funds or borrowed funds? (a) Loans from commercial banks. (b) Trade credit.
13.
Distinguish between shares and debentures on the basis of (a) repayment (b) voting rights.
14.
A company has 35,000 debentures of ₹100 each at 8% interest. This year it earns ₹700,000 before interest. (a) How much interest is due? (b) What is left for shareholders before tax?
15.
Aman holds 190,000 equity shares of ₹10 each. The company declares a dividend of 12%. How much dividend is received?
16.
A factor collects debts of ₹300,000 for a firm and charges a commission of 1%. How much does the firm finally receive?
Section C — Word problems4 × 4 = 16 marks
17.
Explain the classification of sources of finance.
18.
Match each with its meaning: (a) equity shares (b) preference shares (c) trade credit. Choose from: ownership capital with voting rights and a varying dividend; shares with a fixed dividend paid before equity; credit given by one trader to another for buying goods.
19.
Read about Shubh Footwear Ltd. (a) A company raises permanent capital by issuing ownership shares. (b) A large company issues a promissory note for 90 days to meet a cash shortage. (c) A company borrows by issuing instruments carrying 9% interest. Identify the source of finance in each part and explain it briefly.
20.
Greenleaf Agro Ltd has equity capital of ₹600,000 and 12% debentures of ₹600,000. It declares a 20% dividend. (a) Find the debenture interest and the equity dividend. (b) Which must be paid even in a year of loss? (c) Which holders own the company?
AmbifulWorksheets
Practice that never repeats
CBSE · Class 11 · Business Studies

Answer key

Sources of Business Finance · AW-11BS-SBF-2026-V1 · For parents — fold back or tear off before handing the sheet to your child.

QAnswerWorking
1(d) retained earnings—
2(a) paying rent to use an asset owned by another—
3(c) retained earnings—
4(a) preference shares—
5(c) lease financing—
6(a) ₹451,00041,000 × 100 × 11/100
7(b) ₹240,00030,000 × 100 × 8/100
8(c) ₹1,260,0001,400,000 × 90/100
9The money needed to start a business and carry on its activities.—
10(a) instruments of debt with a fixed rate of interest (b) shares with a fixed dividend paid before equity—
11(a) equity shares (b) GDRs—
12(a) borrowed funds (b) borrowed funds—
13(a) shares: only on winding up; debentures: after a fixed period (b) shareholders: yes; debenture holders: no—
14(a) ₹280,000; (b) ₹420,00035,000 × 100 × 8/100; 700,000 − 280,000
15₹228,000190,000 × 10 × 12/100
16₹297,000300,000 − 1% of 300,000
17By period: long, medium and short term; by ownership: owner’s funds and borrowed funds; by source of generation: internal and external.—
18(a) ownership capital with voting rights and a varying dividend (b) shares with a fixed dividend paid before equity (c) credit given by one trader to another for buying goods—
19(a) equity shares: ownership capital (b) commercial paper: a short-term unsecured promissory note (c) debentures: borrowed capital at a fixed interest—
20(a) interest ₹72,000, dividend ₹120,000 (b) debenture interest (c) equity shareholders600,000 × 12/100; 600,000 × 20/100