Sources of Business Finance – NCERT Class 11 Business Studies Chapter 7 Summary

Sources of Business Finance – NCERT Class 11 Summary

Sources of Business Finance – NCERT Class 11 Summary

Finance is essential for starting, operating, and growing a business. This chapter explains various internal and external sources of finance and how businesses choose the right one.

🔹 1. Meaning of Business Finance

Business finance refers to the funds required to start, operate, and expand a business. It includes both short-term and long-term needs.

🔹 2. Types of Finance Based on Duration

  • Short-term: Needed for less than 1 year (e.g., working capital, salaries).
  • Medium-term: 1 to 5 years (e.g., equipment purchase, marketing).
  • Long-term: More than 5 years (e.g., land, buildings, expansion).

🔹 3. Sources of Finance Based on Ownership

  • Owner's Funds: Provided by owners (e.g., equity shares, retained earnings).
  • Borrowed Funds: Borrowed from outsiders (e.g., loans, debentures).

🔹 4. Internal vs External Sources

  • Internal: Retained earnings, depreciation funds.
  • External: Equity shares, preference shares, loans, debentures, banks.

🔹 5. Major Sources of Finance

  • Equity Shares: Ownership capital, no fixed return, voting rights.
  • Preference Shares: Fixed return, preference in dividend & capital return.
  • Debentures: Loan capital with fixed interest.
  • Loans from Banks: Common and flexible source.
  • Public Deposits: Money collected directly from public.
  • Trade Credit: Credit from suppliers.
  • Retained Earnings: Profits reinvested in business.

🔹 6. Factors Affecting Choice of Finance

  • Cost of finance
  • Risk involved
  • Control and ownership
  • Time period of requirement
  • Flexibility and availability

📌 Conclusion

Choosing the right source of finance is crucial for business success. A good mix of equity, loans, and internal funds ensures smooth and efficient operations.

🔖 Labels:

Business Studies, NCERT Class 11, Business Finance, Sources of Finance, Loans, Equity, Chapter 7, Borrowed Funds, Owner's Funds

Post by YourBlogName | Based on NCERT Class 11 Business Studies Chapter 7

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