Question

Q13. Which of the following is not an external source of finance?
a) issue of debentures.
b) borrowing from commercial banks
c) accepting public deposits
d) retained profits​

Answer 1

Answer:

a) issue of debentures

Answer 2

d) retained profits​

• Retained earnings are the part of the profit that has been saved by the business entity over the years and are not considered an external source of finance unlike debentures or public deposits.
• Debenture is a kind of external liability in which corporation borrows money from outside people and pay them dividends.
• Similarly, public deposits are also the money collected by the business entities from outside people by issuing them shares or any other kind of security.
• Borrowings from the commercial banks also refers to the loan taken by the entity from central or other commercial banks that has to be repaid along the amount of interest decided before.
• External source of financing is when the firm seeks for financial help from outside their institution.

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