What is business finance and why is it essential for running a business?

Business finance refers to the funds required to carry out business activities. It is essential because it facilitates operations, investments, and growth within a business.

Fill in the blanks: Public deposits can be invited for a period of ___ to ___ years and cannot exceed ___ of its share capital.

Six months to 3 years; 25%

True or False: Equity shares carry special or preferential rights.

False. Equity shares do not carry any special or preferential rights.

What is the primary characteristic of debentures in relation to business finance?

Debentures constitute the borrowed funds of a company and serve as an acknowledgment of debt, representing debt capital.

Riddle: I am a source of short-term finance, and I help businesses manage credit and collect debts, what am I?

Factoring.

What distinguishes shares from debentures in terms of ownership and return?

Shares represent ownership in a company and provide dividends, whereas debentures are a form of debt that pays interest but does not confer ownership.

Fill in the blank: A lease is a contractual agreement where the owner of an asset grants rights to use the asset to another party for ___ .

Rent

What is trade credit and who primarily relies on it?

Trade credit is the credit extended by one trader to another for purchasing goods or services, and small and new firms usually depend on this source of financing.

What is commercial paper and what is its typical duration?

Commercial paper is an unsecured promissory note issued by firms to raise funds for a short period, typically ranging from 90 days to 364 days.

Loans from financial institutions are also known as ___ and they include institutions like IFCI, ICICI, and IDBI.

Institutional finance

True or False: Only firms with poor credit ratings can issue commercial paper.

False. Only firms having good credit ratings can issue commercial paper.

What are two main instruments used by Indian companies to tap international sources of finance?

Shares and debentures.

Riddle: I am a short-term financial tool used by firms for quick funding; I am often unsecured and my life is less than a year. What am I?

Commercial paper.

Fill in the blank: The choice of source of funds for a business is affected by factors such as ___, cost, and the time frame of need.

Risk

Describe the difference between equity shares and preference shares.

Equity shares provide ownership in a company with voting rights and variable dividends, while preference shares offer fixed dividends and priority over equity shares in asset distribution but typically lack voting rights.

What are the three types of business finance?

Long term, Medium term, Short term

The funds needed for day-to-day operations of a business are known as ___ funds.

Working capital

True or False: Retained profits are profits that are distributed to shareholders.

False. Retained profits are undistributed profits re-invested in the business.

What is self-financing?

Self-financing refers to using one's own funds for business operations and investments.

Fill in the blanks: Debentures are considered as ___ security.

Creditorship

Riddle: I come in two types, equity and preference. My purpose is to raise money for a business's quest. What am I?

Shares

What is the agreement called where the owner of an asset grants another party the right to use the asset in return for a periodic payment?

Lease agreement

Which international sources of finance are abbreviated as ADRS and GDRS?

American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs)