This document discusses various sources of finance for companies. It outlines long-term sources such as bank loans, equity shares, debentures, and internal accruals. Medium-term sources include leasing, hire purchase, bonds, and medium-term loans. Short-term sources are bank overdrafts, trade credits, and customer advances. The document also discusses share capital, types of shares including preference and equity shares, borrowed funds both secured and unsecured, and international and domestic sources of funds.
4. MEDIUM TERM FINANCE
• Leasing: A lease is a contractual arrangement calling for the lessee (user) to pay the
lessor (owner) for use of an asset.
• Hire Purchase: The ownership is transferred to buyer after all the higher purchase
installments are paid up.
• Bonds: A bond is an instrument of indebtedness of the bond issuer to the holders
• Medium Term Loan
6. SOURCES OF FUNDS
A company might raise new funds from the following sources:
· The capital markets:
i) new share issues, for example, by companies acquiring a stock market listing
for the first time
ii) rights issues
· Loan stock
· Retained earnings
· Bank borrowing
· Government sources
· Business expansion scheme funds
7. SHARE CAPITAL
Funds raised by issuing shares in return for cash or other considerations. The
amount of share capital a company has can change over time because each time a
business sells new shares to the public in exchange for cash, the amount of share
capital will increase. Share capital can be composed of both common and preferred
shares.
It is also known as "equity financing".
8. TYPES OF SHARE CAPITAL
ISSUED AND SUBSCRIBED
CAPITAL
• EQIUTY SHARE CAPITAL
• PREFERENCE SHARE CAPITAL
AUTHORIZED SHARE CAPITAL
• EQUITY SHARE CAPITAL
• PREFERENCE SHARE CAPITAL
SHARE CAPITAL
9. PREFERENCE
• Rate of dividend is fixed.
• Do not carry the voting rights.
• Can be converted into equity shares.
• Preference shared may be redeemed.
• Do not have the right to participate in
the management of the company
EQUITY
• RATE OF DIVIDEND IS DECIDED BY
THE BOARD OF DIRECTORS , YEARS TO
YEARS DEPENDING ON PROFIT.
• CARRY THE VOTING RIGHTS.
• CANNOT BE CONVERTED.
• A COMPANY MAY BUY-BACK ITS
EQUITY SHARES.
• EQUITY SHARES HAVE THE RIGHT TO
PARTICIPATE IN THE MANAGEMENT
OF THE COMPANY.
Deferred credit: Income that is received by a business but not immediately reported as income
Debentures: A type of debt instrument that is not secured by physical assets or collateral.
Internal accruals: The internal accruals of a business are the accumulation of retained earnings and depreciation charges
Debt Factoring: It involves the business selling its bills receivable to a debt factoring company at a discounted price. In this way the business get access to instant cash
Trade credits: Usually in business dealing supplier give a grace period to their customers to pay for the purchases. This can range from 1 week to 90 days depending upon the type of business and industry