2. Classification of Financial Needs of
Enterprise
• On the basis of extent of permanence, the
financial needs are classified into two types:
• (1)Fixed Capital- The money invested in some
fixed assets or durable assets like land,
building, machinery, equipment.
• (2)Working Capital- The money invested in
current assets like raw material, finished
goods is known as working capital.
3. Classification of Financial Needs of
Enterprise
• On the basis of period of use.
• (1)Long term Capital- This is such money
whose repayment is arranged for more than
five years in future. The source of long-term
finance could be term-loan from financial
institutions, credit facilities from the
commercial banks.
4. Classification of Financial Needs of
Enterprise
• Short-Term Capital- This is borrowed
capital/money that is to be repaid within one
year. The sources of short term finance
include bank borrowings for working capital or
borrowing from friends and relatives etc.
5. Sources of Finance
• Internal Sources:
• Owners capital
• Deposits and loans given by the owner, the
partners, the directors
• Personal
6. Sources of Finance
• External Sources
• Deposits or borrowings from relatives and friends
and others
• Borrowings from the banks for working capital
purposes
• Credit facilities from the commercial banks
• Term loan from financial institutions
• Margin money, subsidies from the Government.
