Which of the following rs an internal source of capital to a business concern?
Which of the following rs an internal source of capital to a business concern?
- A) Trade credit
- B) Debenture
- C) Overdraft
- D) Retained profit
Correct Answer: D) Retained profit
Explanation
This question is asking about an internal source of capital for a business concern. An internal source of capital means that the money comes from within the business itself, rather than from external sources like loans or investments.Option A: Trade credit is not an internal source of capital. It refers to the practice of buying goods or services on credit from suppliers. This means that the business can delay payment for a certain period of time, but it is still a liability to the business.
Option B: Debenture is not an internal source of capital. It is a long-term loan that a company takes from individuals or institutions. This is considered an external source of capital.
Option C: Overdraft is not an internal source of capital. It is a facility provided by a bank that allows a company to withdraw more money than it currently has in its account. It is a form of short-term borrowing and is considered an external source of capital.
Option D: Retained profit is the correct answer. Retained profit refers to the portion of a company's profit that is not distributed to shareholders as dividends, but is instead kept within the company for reinvestment or future use. It is an internal source of capital because it comes from the company's own earnings.
In summary, the correct answer is Option D: Retained profit, as it is an internal source of capital that comes from a business's own earnings