sources of business finance class 11 case study

They are an important source of financing non-trade international operations. It is recommended for the students to practice the given Class 11 Business Studies chapter wise important questions with the answers. Short-term funds are those which are required for a period not exceeding one year. Commercial paper is an unsecured promissory note issued by a firm to raise funds for a short period, varying from 90 days to 364 days. FCCB’s are listed and traded in foreign stock exchanges. In Companies Act permitting companies to issue two categories of equity shares. Issue of debentures, borrowing from commercial banks and financial institutions and accepting public deposits are some of the examples of external sources of funds commonly used by business organizations. Lease finance provides an important means of modernization and diversification to the firm. There must be financial institutions to provide financial assistance and guidance to industries and business enterprises. With the opening up of an economy and the operations of the business organizations becoming global, Indian companies have an access to funds in global capital market. When large amount of money is required to be raised, it is generally done through the use of external sources. Such capital forms the basis on which owners acquire their right of control of management. Equity shares are the most important source of raising long term capital. ‘Borrowed funds’ on the other hand, refer to the funds raised through loans or borrowings. 13. Short-term financing is most common for financing of current assets such as accounts receivable and inventories. Sources of Business Finance Notes Class 11: Extramarks offers notes & NCERT solutions of Sources of Business Finance for CBSE Class 11. (I) Financial institutions follow rigid criteria for grant of loans. Borrow Fund The second source of funding to a busin… Equity shares represent the ownership of a company and thus the capital raised by issue of such shares is known as ownership capital or owner’s funds. As such if a firm is not in a position to redeem its paper due to financial difficulties, extending the maturity of a CP is not possible. It is similar to a GDR except that it can be issued only to American citizens and can be listed and traded on a stock exchange of USA. It provides the basis of expansion and growth of companies. Under this, the receivables on account of sale of goods or services are sold to the factor at a certain discount. Learning these would definitely help the students in scoring good marks in board examinations. Generally, borrowed funds are provided on the security of some fixed assets. Thus, business firm should choose a source keeping in mind the extent to which they are willing to share their control over business. Equity shares are the most important source of raising long term capital by a company. Case study questions involving various topics and chapters in Business Studies are becoming a reason to create panic in students but there is nothing like this. Candidates can click on the subject wise link to get the same. Meaning, Nature and Significance of Business Finance . (b) Medium Term Finance The finance required by business enterprises for more than one year but less than five years is known as medium term finance. Here on AglaSem Schools, you can access to NCERT Book Solutions in free pdf for Business Studies for Class 11 so that you can refer them as and when required. They are referred to as ‘residual owners’ since they receive what is left after all other claims on the company’s income and assets have been settled. (ii) Secrecy of business can be maintained as the information supplied to the bank by the borrowers is kept confidential; (iii) Formalities such as issue of prospectus and underwriting are not required for raising loans from a bank. CBSE guide notes are the comprehensive notes which covers the latest syllabus of CBSE and NCERT. A company cans raise owner’s funds in the following ways:- 1. Question 10: Internal sources of capital are those that are. Finance, therefore, is called the life blood of any business. generated through outsiders such as suppliers; The main securities used by Indian companies to tap international sources of finance are given below, (i) Loans from Commercial Bank!’;(ii) International Agencies and Development Bank(iii) International Capital Market, The businessman must keep in mind the following factors, (i) Cost involved(ii) Financial capacity of the firm(iii) Form of business organisation(iv) Time period(v) Risk involved(vi) Control(vii) Flexibility(viii) Claim over the assets(ix) Tax benefits. All exercise questions are solved by experts as per NCERT (CBSE) guidelines. Sources of Business Finance 11th Business CBSE NCERT Chapter 8 Marketing along with videos,solved papers and worksheets.These are helpful for students in doing homework or preparing for the exams (I) it is preferred by investors who want fixed income at lesser risk; (ii) Debentures are fixed charge funds and do not participate in profits of the company; (iii) The issue of debentures is suitable in the situation when the sales and earnings are relatively stable; (iv) As debentures do not carry voting rights, financing through debentures does not dilute control of equity shareholders on management; (v) Financing through debentures is less costly as compared to cost of preference or equity capital as the interest payment on debentures is tax deductible. Bank credit is not a permanent source of funds. According to BO Wheeler, “Finance is thai business activities which is concerned with acquisition and conservation of capital fund in meeting the financial needs and over all objectives of business enterprise.” The financial needs of a business can be classified into two categories. Issue of Zero Interest Debentures (ZID) which does not carry any explicit rate of interest has also become popular in recent years. Below we provided the Notes of Class 11 Business Studies for topic Sources of Business Finance. 6. 1. Business Finance It refers to capital funds and credit funds invested in the business. There are two types of cost viz., the cost of procurement of funds and cost of utilizing the funds. A business, for example, can generate funds internally by accelerating collection of receivables, disposing of surplus inventories and Ploughing back its profit. The profit available for ploughing back in an organization depends on many factors like net profits, dividend policy and age of the organization. BUSINESS STUDIES CLASS XI - VALUE BASED QUESTIONS VALUE BASED QUESTIONS. Thus, there is no tax saving as in the case of interest on loans. A firm may also offer different credit terms to different customers. The interest is required to be paid irrespective of the firm earning a profit or incurring a loss. FCCB’s are very similar to the convertible debentures issued in India. (I) only financially sound and highly rated firms can raise money through commercial papers. Register for Online tuition on Vedantu.com to score more marks in CBSE examination. Question 1: Equity shareholders are called. Necessary funds can be obtained from a bank. Providing information about credit worthiness of prospective client’s etc., Factors hold large amounts of information about the trading histories of the firms. This is possible only when you have the best CBSE Class 11 Business Studies study material and a smart preparation plan. (ii) The normal business operations may be affected in case the lease is not renewed; (iii) It may result in higher payout obligation in case the equipment is not found useful and the lessee opts for premature termination of the lease agreement; and. Class 11 Important Business Studies Questions. The need for funds arises from the stage when an entrepreneur makes a decision to start a business. CBSE Class 11 Business Studies Notes Maths Notes Accountancy Notes Sociology Notes. These bodies provide long and medium term loans and grants to promote the development of economically backward areas in the world. Generally, the cost of CP to the issuing firm is lower than the cost of commercial bank loans; (iv) A commercial paper provides a continuous source of funds. 12. Class 11 Business Studies Sources of Business Finance – Get here the Notes for Class 11 Business Studies Sources of Business Finance. For the grant of loan. Class 11 Business Studies notes on Chapter 7 Sources of Business Finance class 11 Notes Business Studies are also available for download in CBSE Guide website. (i) Discounting of Bills of Exchange When goods are sold on credit then a supplier generally draws bills of exchange upon customers who are required to accept the same. A business person, therefore, has to look for different other sources from where the need for funds can be met. (i) Borrowed fund(ii) Fixed rate of interest(iii) Compulsory payment of interest(IV) Security(v) Redeemable(vi) No, voting right(vii) Appointment of trustee. 1. Business Finance It refers to capital funds and credit funds invested in the business. Preference shareholders generally do not enjoy any voting rights. The importance of finance increased tremendously these days because of mass production and use of capital intensive techniques. Depending on the situation, purpose, cost and associated risk, a choice may be made about the source to be used. The long-term sources fulfill the financial requirements of an enterprise for a period exceeding 5 years and include sources such as shares and debentures, long-term borrowings and loans from financial institutions. RBSE Class 11 Business Studies Chapter 5 Short Answer Type Questions (SA – II) Question 1. Exemplar Questions Class 11 is a very important resource for students preparing for the Examination. When the earnings of the organization are not stable, fixed charged funds like preference shares and debentures should be carefully selected as these add to the financial burden of the organization. NCERT Solutions Class 11 Business Studies Chapter 8 Sources of business finance. In addition to providing financial assistance, these institutions also conduct market surveys and provide technical assistance and managerial services to people who run the enterprises. The NCERT Solutions to the questions after every unit of NCERT textbooks aimed at helping students solving difficult questions. There are many benefits that a company can gain from business case study presentations. Hope these notes will help you understand the important topics and remember the key points for exam point of view. Under recourse factoring, the client is not protected against the risk of bad debts. Similarly, some funds are required for day-to-day operations, say to purchase raw materials, pay salaries to employees, etc. Issue of equity shares and retained earnings are the two important sources from where owner’s funds can be obtained. A short-term need for example can be met through borrowing funds at low rate of interest through trade credit, commercial paper, etc. There are two major sources of finance for meeting the financial requirements of any business enterprises, which are as under:- 1. (c) Short Term Finance The finance required for a short period upto one year is known as short term finance. Each of the sources has unique characteristics, which must be properly understood so that the best available source of raising funds can be identified. Business should plan according to the time period for which the funds are required. These sources include borrowings from commercial banks, public deposits, lease financing and loans from financial institutions. This is known as fixed capital requirements of the enterprise. For long term finance, sources such as issue of shares and debentures are more appropriate. Such sources provide funds for a specified period, on certain terms and conditions and have to be repaid after the expiry of that period. On the other hand, the factor assumes the entire credit risk under non-recourse factoring i.e., full amount of invoice is paid to the client in the event of the debt becoming bad. Thus, these shares may not be very attractive to the investors; (v) The dividend paid is not deductible from profits as expense. Business simply cannot function without money, and the money required to make a business function is known as business funds. Question from very important topics is covered by Exemplar Questions for Class 11. 11. The assets of a company are, therefore, free to be mortgaged for the purpose of borrowings, if the need be; (vi) Democratic control over management of the company is assured due to voting rights of equity shareholders. (I) Retained earnings is a permanent source of funds available to an organization; (ii) It does not involve any explicit cost in the form of interest, dividend or floatation cost; (iii) As the funds are generated internally, there is a greater degree of operational freedom and flexibility; (iv) It enhances the capacity of the business to absorb unexpected losses; (v) It may lead to increase in the market price of the equity shares of a company. Generally, commercial banks provide short and medium term loans but now-a-days they have started giving long term loans against security. Class 11 Chapter-wise, detailed solutions to the questions of the NCERT textbooks are provided with the objective of helping students compare their answers with the sample answers. Thus, a holder of FCCB has the option of either converting them into equity shares at a predetermined price or exchange rate, or retaining the bonds. Candidates who are ambitious to qualify the Class 11 with good score can check this article for Notes. The case study will give its reader a clear concept about the different sources of finance. Business Studies Case studies Class 11; Chapters 3,4 and 5 Chapter: 3 Private, Public and Global Enterprises Q:1 It is a public enterprise established under the Indian Companies Act and conducts business in competition with companies in private sector. On the basis of period, the different sources of funds can be categorized into three parts. A company can issue different types of preference shares. 1. Business Finance It refers to capital funds and credit funds invested in the business. Trade Credit It refers to an arrangement whereby a manufacturer is granted credit from the supplier of raw materials, inputs spare parts etc. Explain sources of Business finance on the basis of the period. For example, Standard Chartered emerged as a major source of foreign currency loans to the Indian industry. Preparing for IIT JEE or AIPMT or CA CPT, © Copyright Pivotal | Public issue of debentures requires that the issue be rated by a credit rating agency like CRISIL (Credit Rating and Information Services of India Ltd.) on aspects like track record of the company, its profitability, debt servicing capacity, credit worthiness and the perceived risk of lending. (ii) Ownership Basis On the basis of ownership, the sources can be classified into ‘owner’s fund’ and ‘borrowed fund’. Sources of funds are used in activities of the business. (I) Availability of easy and flexible trade credit facilities may induce a firm to indulge in overtrading, which may add to the risks of the firm; (ii) Only limited amount of funds can be generated through trade credit; (iii) It is generally a costly source of funds as compared to most other sources of raising money. (I) Funds are generally available for short periods and its extension or renewal is uncertain and difficult; (ii) Banks make detailed investigation of the company’s affairs, financial structure etc., and may also ask for security of assets and personal sureties. Another basis of categorizing the sources of funds can be whether the funds are generated from within the organization or from external sources. For carrying out various activities, business requires money. (a) Cushion of security(b) Funds for new and innovative projects(c) Medium and long term finance(d) Conversion into ownership fund. Identify in the following cases factor affecting the choice of capital: Raj an has an option of taking … They are classified based on time period, ownership and control, and their source of generation.Learn more about Sources of Financing Business here. (ii) Banking and Finance: Business needs funds for acquiring assets, purchasing raw materials and meeting other expenses. (I) Receiving a fixed rate of dividend, out of the net profits of the company, before any dividend is declared for equity shareholders; and. 1.9 CBSE Class 11 Business Studies-Sources of Business Finance 1.10 CBSE Class 11 Business Studies-Social responsibilities of Business and Business Ethics 2 More related readings Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period. Get Sources of Business Finance, Business Studies Chapter Notes, Questions & Answers, Video Lessons, Practice Test and more for CBSE Class 10 at TopperLearning. Firms of all sizes can approach commercial banks. Practice sample question papers … 14. In addition, many non-banking finance companies and other agencies provide factoring service. (i) Fixed capital requirement(ii) Working capital requirement. The above NCERT CBSE and KVS worksheets for Class 11 Business Studies will help you to improve marks by clearing Business Studies concepts and also improve problem solving skills. With leasing contract the lessee can use the assets without investing a high amount of fund for buying it. Similarly, the purposes for which funds are required need to be considered so that the source is matched with the use. At the end of the lease period, the asset goes back to the lessor. the doors of foreign companies and investors were opened to invest In the Indian companies. Lease Financing Leasing is a contract between lessor and lessee. The owner’s capital remains invested in the business for a longer duration and is not required to be refunded during the life period of the business. External sources of funds include those sources that lie outside an organization, such as suppliers, lenders, and investors. 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By paying rent one firm to other business firms, insurance companies, pension funds banks! ) and collection of the debt units called shares Solutions from here interest specified. Advised to revise complete syllabus and score more marks in your Class 11th continuously! Vedantu.Com to score more marks in board examinations or services are sold to time... Receipts after a specific period or one year enterprise do not end with the and. The credit extended by one firm to other business firms, insurance companies, pension funds and.... The two important sources from where funds can be met through borrowing at! Be valuable to those who are prospective in business of public deposits public are! Control, and other agencies provide factoring service the most important source short-term. Incurring a loss also offer different credit terms to different customers with rights. As ‘ sundry creditors ’ or ‘ accounts payable ’ Notes for CBSE students lessor in return a... 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