PPT - Sources of Business Finance | Business Studies (BST) Class 11 - Commerce PDF Download

 Page 1


Sources of Business 
Finance
Page 2


Sources of Business 
Finance
Meaning, Nature And 
Significance of Business 
Finance
1
Definition
Business finance refers to 
the funds required by an 
enterprise to carry out its 
various activities.
2
Importance
Finance is the lifeblood of 
any business. A business 
cannot function without 
adequate funds.
3
Assessment
Clear assessment of financial needs and identification of 
various sources is significant for running a business 
organization.
Page 3


Sources of Business 
Finance
Meaning, Nature And 
Significance of Business 
Finance
1
Definition
Business finance refers to 
the funds required by an 
enterprise to carry out its 
various activities.
2
Importance
Finance is the lifeblood of 
any business. A business 
cannot function without 
adequate funds.
3
Assessment
Clear assessment of financial needs and identification of 
various sources is significant for running a business 
organization.
Financial Requirements of Business
Fixed Capital Requirements
Funds needed to purchase fixed assets like land, building, 
plant, machinery, and furniture. These remain invested for 
long periods.
Working Capital Requirements
Funds for day-to-day operations, holding current assets 
like stock of material, bills receivables, and meeting 
current expenses.
Page 4


Sources of Business 
Finance
Meaning, Nature And 
Significance of Business 
Finance
1
Definition
Business finance refers to 
the funds required by an 
enterprise to carry out its 
various activities.
2
Importance
Finance is the lifeblood of 
any business. A business 
cannot function without 
adequate funds.
3
Assessment
Clear assessment of financial needs and identification of 
various sources is significant for running a business 
organization.
Financial Requirements of Business
Fixed Capital Requirements
Funds needed to purchase fixed assets like land, building, 
plant, machinery, and furniture. These remain invested for 
long periods.
Working Capital Requirements
Funds for day-to-day operations, holding current assets 
like stock of material, bills receivables, and meeting 
current expenses.
Classification of Sources of 
Funds
1
Period Basis
Long-term (>5 years), Medium-term (1-5 years), and 
Short-term (<1 year) sources.
2
Ownership Basis
Owner's funds (equity shares, retained earnings) and 
Borrowed funds (loans, debentures).
3
Source of Generation
Internal sources (within organization) and External 
sources (outside organization).
Page 5


Sources of Business 
Finance
Meaning, Nature And 
Significance of Business 
Finance
1
Definition
Business finance refers to 
the funds required by an 
enterprise to carry out its 
various activities.
2
Importance
Finance is the lifeblood of 
any business. A business 
cannot function without 
adequate funds.
3
Assessment
Clear assessment of financial needs and identification of 
various sources is significant for running a business 
organization.
Financial Requirements of Business
Fixed Capital Requirements
Funds needed to purchase fixed assets like land, building, 
plant, machinery, and furniture. These remain invested for 
long periods.
Working Capital Requirements
Funds for day-to-day operations, holding current assets 
like stock of material, bills receivables, and meeting 
current expenses.
Classification of Sources of 
Funds
1
Period Basis
Long-term (>5 years), Medium-term (1-5 years), and 
Short-term (<1 year) sources.
2
Ownership Basis
Owner's funds (equity shares, retained earnings) and 
Borrowed funds (loans, debentures).
3
Source of Generation
Internal sources (within organization) and External 
sources (outside organization).
Retained Earnings
Definition
Portion of net earnings 
retained in business for 
future use rather than 
distributed as dividends.
Advantages
Permanent source, no 
explicit cost, operational 
freedom, absorbs 
unexpected losses, may 
increase share price.
Limitations
May cause shareholder dissatisfaction, uncertain source due to 
profit fluctuations, opportunity cost often not recognized.