Fill in the blanks with appropriate words in the following statements.
Business enterprises require two types of finance, they are ___________ and ___________.
Short Term Finance and Long Term Finance
Explanation: Any Business enterprises requires both short term and long term finances for day to day expenses and for expansion of their business.
Fill in the blanks with appropriate words in the following statements.
‘The suppliers of goods raise credit from the buyers,’ it is called ____________.
Trade
Explanation: The supplier of goods raise credit from the buyer for trade. It is to make the business running continuously, and the payments are collected in instalments.
Fill in the blanks with appropriate words in the following statements.
The business concerns raise credit to carry out day to day affairs and is called ___________.
Loan
Explanation: The business concerns raise credit in the form of loan from the bank to handle day to day expenses. Most businesses face time delays between their sales and the payments for their sales and so to compensate for the gap they take loans.
Fill in the blanks with appropriate words in the following statements.
For immediate needs the business institutions get credit from ____________.
Banks and Money lenders
Explanation: Banks and Money lenders are the easiest option to obtain immediate cash by promising certain documents which are required to lend them the money for the business.
Fill in the blanks with appropriate words in the following statements.
The capital of joint-stock companies is divided into small units. They are called ___________.
Stock
Explanation: Stocks are smaller units of any company which people can buy and by means of that the company raise money for their long term expense.
Fill in the blanks with appropriate words in the following statements.
The bank that supplies credit to import and export trade is called ___________.
Exim Bank
Explanation: The Exim banks are specialised bank operated by the government that provide finance for the import and export traders.
Fill in the blanks with appropriate words in the following statements.
The IFCI was started in the year ___________.
1948
Explanation: The Industrial Finance Corporation of India (IFCI) was established under the Act of Parliament to support Industries with a loan for their expenses.
Fill in the blanks with appropriate words in the following statements.
The first share market of India was started at __________.
Bombay
Explanation: In Bombay, they started the first Stock Exchange / Stock Market to perform exchange of securities.
Answer the following questions in two to three sentences each.
What is the meaning of financial management ?
Financial Management is the process of effectively managing, organizing and controlling the finance of any businesses for the smooth running and also to make the necessary financial actions and steps that are needed for the enterprise.
Answer the following questions in two to three sentences each.
Which are the two types of finance required by the business concerns ? Give examples.
Short team finance and Long term finance are the two types of finance required for any business concerns. Short term finances are required for day to day activities like purchase of raw material, salaries, wages, marketing and administrative expenses. Whereas Long term finances are required for the greater change in the organization like the development of business, modernization, production changes, assets buying etc.
Answer the following questions in two to three sentences each.
Mention any four sources of short term credit required by business concerns?
The few sources of short term credit are
• Trade credit
• Bank loan
• Advance form Customer
• Indigenous Bank loans
Answer the following questions in two to three sentences each.
Why business concerns require short term finance?
Most businesses face time delays between their sales and the payments they make for their sales, so to compensate for the gap they take short term loans. These short term finances are used for day to day expenditures that includes activities like purchase of raw material, salaries, wages, marketing and administrative works.
Answer the following questions in two to three sentences each.
What do you mean by long term finance?
Long term finances are borrowed or arranged for the expenses that are higher in number. Usually, these long term finances are made through stocks and debentures. They are used for the development of business, modernization, production changes and assets buying etc.
Answer the following questions in two to three sentences each.
Give the names of any three organizations in the field of ‘Mutual funds’
Mutual fund is a way of raising the money by investing the investor's money in stocks and bonds and gaining profit. Few mutual funds organization in India are
• LIC growth fund
• HDFC income fund
• Bajaj Allianz
Answer the following questions, each in about eight to ten sentences.
What is the role and importance of finance to business concerns?
The role and importance of finance to business concerns are
• Finance is the lifeblood of any organizations, and it plays a major role in every business activity.
• Finance helps in buying/obtaining of resources & raw materials for production and for the marketing of goods & services.
• Finances help in the smooth running of the business, which ultimately helps in attaining the organizational goals.
• Finance regulates investment decisions and expenditure.
• Finance helps in the modernization of business, production changes, assets buying, development, R&D, salaries, marketing and operations.
• Finances help in improving the business for greater profit.
• Financial stability enhances the creditworthiness of any organization.
Answer the following questions, each in about eight to ten sentences.
Explain briefly the purposes for which long term finance is required by business concerns?
Long term finances are borrowed or arranged for the expenses that are higher in number. Businesses always need surplus cash to operate efficiently and to handle the bigger change in their organization. Any organization that requires a large amount of cash is for the reasons below
• Development of business
• Modernization
• Production changes or enhancements
• Assets buying
• Research and Development (R&D)
• Establishing new undertaking etc.
Usually, any company sources long term finance when they have insufficient cash but are in need of higher capital to carry out their operations.
Answer the following questions, each in about eight to ten sentences.
“Issue of shares and debentures play a very important role in long term credit.” What are they ? How do they help ?
Long term finances are usually made through Stocks and Debentures.
Stocks - Stocks are smaller units of any company which people can buy/exchange for a price. The price value varies based on the company’s value and the revenue they make.
Stocks are a smaller part of company assets and the earnings of any company, and by selling them, the organization make money for their expense. The higher the stock value, the higher the money they make.
Debentures – Debentures are the debts that are borrowed without any collateral but completely based on the creditworthiness and reputation of the organization. The debentures are made by a legal agreement signed by both the borrowers and the lenders.
Debentures greatly help companies since it has lower interest rates and longer repayment dates without any collateral.
Answer the following questions, each in about eight to ten sentences.
What is the part played by Industrial Finance Corporation (IFC) and State Finance Corporations (SFS) in financing business?
The Industrial Finance Corporation (IFC) is a Non-banking finance company that provide loans for public limited companies and co-operative societies. The IFC provides funds only to these organizations that serve the public directly like Airports, Roads, Telecom, Power and Manufacturing industries. It extends its offer to provide loans for the state-owned public limited companies as well.
The State Finance Corporation (SFC) is a supplement of IFC that are managed by the Individual State government to provide loans for micro, small and medium scale industries within their state. SFC helps organizations to get loans for buying land for business, machinery purchase and plant establishment.
Answer the following questions, each in about eight to ten sentences.
What are long term public deposits, and what are their advantages to the public?
The Long term public deposits are the deposits that the public can buy from the issuing companies for a period of 6 months to not more than 60 months with interest rates for their capital from 8% to 10%. This helps the companies to raise funds for their operations immediately and ultimately profits the buyer as well with the interest they receive at the maturity.
The public who are willing to invest money in organizations can look for companies that are offering “public deposits” and make their deposits with choosing certain period as their maturity. The organization provides interest ranges from 8% to 10% to the deposited capital and also paybacks the entire capital at the time of maturity. This way, both organizations and the public are benefited. Usually, the organizations invest the money obtained from the deposits in their business to attain greater profit for their establishment and to repay the deposits.
Answer the following questions, each in about eight to ten sentences.
What do you mean by Money market and how is it different from the capital market?
Money market is used to arrange or trade the finance for a short period of time which varies from 1 day, 1 week, 3 to 6 months or 1-year maximum from commercial banks, financial banks and chit funds etc. The interest rate is high in the money market. The money market is obtained based on trade bills, bonds and treasury bills.
Whereas, the Capital market is a way to obtain finance for long term needs by promising the stocks, debentures, bonds etc. The interest rate is low in the capital market. The financial institutions, financial corporation, mutual funds etc. have made the capital markets a well-organized one than compared to the money market.
Answer the following questions, each in about eight to ten sentences.
Explain in brief the part played by the stock exchange in Financial matters of business.
The stock exchange/stock market plays a major role in providing a platform for buying and selling of stocks and securities that helps organizations to raise funds. The Stock exchanges are regulated and monitored by the governments. The brokers trade the securities between the stock buyers and sellers.
The companies list their name and the number of shares they are willing to sell in the stock market where the buyers have access to buy any number of available shares. The business concerns are highly benefited as it helps in fundraising for their business needs by selling their stocks.
Activity :
Visit a Bank near your place and collect information from the manager, to which business organizations, the bank advances short terms credit and long term credit.
Will be done by students.
Activity :
Collect information from newspapers about the raise and fall of share value of certain organizations. Also find out why the share value falls in certain cases.
• Infosys Ltd.
BSE & NSE rate:
o Date June 18, 2019
BSE rate: 750.65
NSE rate: 750.15
o Date June 17, 2019
BSE rate: 740.40
NSE rate: 740.55
o Date June 05, 2019
BSE rate: 734.70
NSE rate: 735.30
The possible reason for the increase in rate:
o Infosys has recently recognized as the winner for “2019 Microsoft Global Alliance SI Partner of the year”
o Recently Infosys was selected by Posti as Key Digital Transformation Technology Partner
o Infosys Collaborates with Microsoft to Accelerate Digital Transformation and Innovation in Smart Buildings & Spaces
The above reasons portray the company’s strength in the market and strong growth in this future profit making. Knowing these strong signs of the growth, people start to buy more shares of the company and due to that, the stock rate keeps raising as per the demand.
• Tata Steel
BSE & NSE rate:
o Date June 18,2019
BSE rate: 472.75
NSE rate: 472.30
o Date June 17,2019
BSE rate: 473.05
NSE rate: 473.10
o Date June 14,2019
BSE rate: 501.45
NSE rate: 501. 80
The possible reason for the decrease in rate:
o The US has imposed 25% tariff on steel import and whereas the US is the largest importer of steel from India.
o Tata made the highest bid for Bhushan steel which is a sick company already and this would increase the debt of the company at a higher level.
o The failure of the joint venture between ThyssenKrupp company in Europe created an unease situation between Tata and EU.
The above reasons contribute to the factors for the fall in share rate in the stock market.