2 Most VSAQ’s of Source of Business Finance Chapter in Inter 1st Year Commerce (TS/AP)

2 Marks

VSAQ-1 : Retained Earnings. (OR) What is meant by Retained Earnings? (OR) What are Retained Earnings?

Retained earnings, also known as retained profits, represent a portion of a company’s net earnings that is not distributed to shareholders as dividends but is instead retained or reinvested in the business for future use. Retained earnings serve as a source of internal financing, allowing the company to fund various activities, investments, or expansion plans without relying on external sources of capital. They are essentially accumulated profits that can be utilized to support the company’s growth and financial stability.

VSAQ-2 : What is long-term finance?

Long-term finance refers to the capital or funds that are not expected to be repaid within a short time frame, typically not within one year. This type of finance is used to support the long-term goals and financial needs of an organization. Long-term finance is often utilized for capital projects, business expansion, and investments that have a longer payback period. Examples of long-term finance include long-term loans, bonds with maturities exceeding one year, and equity investments. These sources of financing provide the necessary funds to support a company’s growth and strategic objectives over an extended period.