Class 11 Business Studies - BIHAR
Sources of Business Finance
The chapter 'Sources of Business Finance' explores how business enterprises raise the necessary funds to establish, run, and expand their operations. For Class 11 students under the Bihar School Examination Board (BSEB), understanding this chapter is crucial as finance is considered the lifeblood of any business. It covers various sources classified on the basis of time (long-term, medium-term, short-term), ownership (owner's funds and borrowed funds), and generation sources (internal and external sources). Scoring well in board exams requires a clear distinction between equity shares, debentures, retained earnings, and trade credit.
Start Learning FreeKey Concepts
Owner's Funds
Funds provided by the owners of the enterprise, such as equity shares and retained earnings, which remain permanently invested in the business.
Borrowed Funds
Funds raised through loans, debentures, bonds, or public deposits that carry an obligation to pay regular interest and repay the principal amount.
Equity Shares
Represent the ownership interest in a company where shareholders bear the ultimate risk and enjoy residual profits, along with voting rights.
Debentures
An instrument issued by a company acknowledging a debt, carrying a fixed rate of interest, and serving as a form of long-term borrowed funds.
Trade Credit
Credit extended by one trader to another for the purchase of goods and services, acting as a vital source of short-term finance.
Important Formulas
Board Exam Info
In the Bihar (BSEB) Class 11 Business Studies examinations, this chapter typically carries around 8 to 12 marks. Questions frequently appear as objective (multiple choice), short-answer questions differentiating between types of funds (e.g., Shares vs. Debentures, Owner's funds vs. Borrowed funds), and long-answer essay questions explaining various sources of long-term finance.
Frequently Asked Questions
What is the main difference between equity shares and debentures?
Equity shares represent ownership in the company with variable returns (dividends) and voting rights, whereas debentures represent debt with a fixed rate of interest and no voting rights.
Why are retained earnings considered an internal source of finance?
Retained earnings are a portion of undistributed profits generated from within the business itself, meaning the company does not need to rely on external agencies or pay issuance costs.
What are the primary sources of short-term business finance?
The main sources of short-term finance include trade credit, bank overdrafts, cash credit, commercial paper, and factoring.
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