Class 11 Business Studies - HARYANA
Sources of Business Finance
The chapter 'Sources of Business Finance' in Class 11 Business Studies for Haryana (BSEH) board explores the various ways business enterprises raise funds to meet their financial needs. Every business requires capital to run day-to-day operations and fund long-term growth. This chapter classifies financial sources based on time duration (long-term, medium-term, and short-term), ownership (owners' funds vs. borrowed funds), and generation sources. Understanding these concepts is crucial for board exams as it forms the foundation of corporate finance and frequently features in case studies and direct descriptive questions.
Start Learning FreeKey Concepts
Owners' Funds
Funds provided by the owners of the business, such as equity shares and retained earnings, which stay permanently in the business and do not need to be refunded.
Borrowed Funds
Funds raised through loans, debentures, public deposits, and trade credit that must be repaid after a specific period and carry a fixed rate of interest.
Equity Shares
The most common source of long-term finance where shareholders become part-owners of the company, bearing the ultimate risk and enjoying voting rights.
Debentures
An instrument issued by a company acknowledging a debt, offering a fixed rate of return to investors without conferring voting rights.
Retained Earnings
A portion of net profits reinvested back into the business instead of being distributed as dividends, also known as ploughing back of profits.
Trade Credit
Credit extended by suppliers of goods and services to a business, acting as a vital short-term source of finance.
Important Formulas
Board Exam Info
In the Haryana Board (BSEH) Class 11 Business Studies examination, this chapter typically carries around 6 to 8 marks. Questions usually include very short answer questions (1 mark), short answer questions (2-4 marks), and long answer/essay type questions differentiating between owners' funds and borrowed funds or explaining specific sources like equity shares and debentures.
Frequently Asked Questions
What is the difference between owners' funds and borrowed funds?
Owners' funds provide long-term capital and voting control with no obligation of fixed return, while borrowed funds are temporary debt requiring regular interest payments and ultimate repayment.
Why is retained earnings considered a permanent source of finance?
Retained earnings are undistributed profits generated internally by the company, meaning the business does not incur any floatation costs or external debt obligations to use them.
Are debenture holders owners or creditors of the company?
Debenture holders are creditors of the company, not owners. They receive a fixed rate of interest regardless of whether the company makes a profit or loss.
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