it is a presentation based on long term sources of finance i have added all major contents and make it error free in best possible ways Errors or suggestions (if any) Feel free to contact NIKHIL JAIN

1. BY-Nikhil Jain

2. Why Finance Required ?
• Start a Business
• Finance expansions to production
Capacity
• To develop and Market new products
• To enter new markets
• To pay for the day to day running of
business

3. Sources Of Finance
• Short Term Finance
• Long Term Finance

4. Long Term Finance
• Funding obtained for a time frame
exceeding one year in duration. When a
business men / firm borrows using long-
term finance methods, it expects to pay
back the loan over more than a one year
period.

5. Purpose of Long Term Finance
• Finance fixed assets.
• To finance the permanent part of
working capital.
• To finance growth and expansion of
business.

6. Sources of Long Term Finance

7. Shares
• A capital of a company is divided into
small units, each unit is called SHARE .

8. Shares
• Issue of Shares is the main source of long
term finance.
• A person holding shares is called
Shareholder.
• Investors are of different habits and
tempraments.

9. Shares

10. Equity Shares
• Equity shares were earlier known as
ordinary shares. The holders of these
shares are the real owners of the
company.
• They have a voting right in the meetings
of holders of the company. They have a
control over the working of the
company.

11. Equity Shares
• Equity shareholders are paid dividend
after paying it to the preference
shareholders.
• The rate of dividend on these shares
depends upon the profits of the
company. They may be paid a higher
rate of dividend or they may not get
anything.

12. Features of Equity Shares
• Equity share capital remains
permanently with the company. It is
returned only when the company is
wound up.
• Equity shareholders have voting rights
and elect the management of the
company.

13. Preference Shares
• Preference Shares are the shares which
carry preferential rights over the equity
shares.
• These rights are-
• Receiving dividends at fixed rate.
• Getting back the capital if the company
is wound up.

14. Preference Shares
• Investments in this shares are safe and a
preference shareholder also gets
dividends regularly.

15. Preference Shares
• Types of Preference Shares
• Cumulative and Non-Cumulative
• Redeemable and Irredeemable
• Participating and Non-Participating
• Convertible and Non-Convertible

16. Cumulative Preference Share
• When unpaid dividends on preference
shares are treated as arrears(outstanding
payments) & are carried forward to
sebsequent years then such preference
shares are called Cumulative Preference
Shares. It means unpaid dividend on
such shares is accumulated till its is paid
off in full.

17. Non-Cumulative Preference Share
• They are those type of preference shares
which have right to get fixed rate of
dividend out of the profits of current
year only. If company fails to pay
dividend in a particular year then that
need not to be paid out of Future profits.

18. Redeemable and Irredeemable
• Redeemable preference shares has a
maturity date on that date company will
repay the Capital amount to the
preference shareholders and discontinue
the dividend payment.
• Irredeemable Preference Shares doesnot
have maturity date. The dividend of these
shares is fixed.

19. Participating & Non-Participating
• Participating Preference shares has an
additional benefit of participating in
profits of the company apart from the
fixed dividend.
• Other Shares who donot participate are
called Non-Participating Preference
Shares.

20. Convertible & Non-Convertible
• Convertible Shares possess an option or
right whereby they can be converted into
an ordinary Equity Share at some agreed
terms and conditions
• Non-Convertible Shares simply doesnot
have these option but has all other
normal characteristics of a preference
shares

21. Debentures
• Debenture is a medium to long term debt
instrument used by large companies to
borrow money, at a fixed rate of interest.
• Issue of loan certificate is given to public.
• Debenture holders have no rights to vote
in the company’s general meeting.

22. Debenture

23. Characterstics of Debentures
• Holders are the Creditors of the
Company.
• Holders do not carry voting rights.
• Debentures are secured.
• Debentures are repayable after a fixed
period of time.

24. Types of Debentures
• Redeemable Debentures
• These are the debentures repayable on a
predetermined date or at anytime prior
to their maturity provided the company
so desires and gives a notice to that
effect.

25. Types of Debentures
• Irredeemable Debentures
• Those debentures which are not
repayable at the end of a definite period.
Usually these debentures are repayable
when the company goes into liquidation.
• Liquidation- winding up a firm by
selling its assests to convert them into
cash

26. Types of Debentures
• Convertible Debentures
• The holders of these debentures are given
the option to convert their debentures into
equity shares at a time & in a ratio as
decided by the company.
• The Debentures which cannot which
cannot be converted into equity shares are
called Non-Convertible Debentures.

27. Bases of Difference Shares Debentures
Ownership The share of the
company provides
ownership to
shareholders.
The debentures
holder provide loan
thus they are
creditors of a
company.
Form of Return The shareholder gets
the return in form of
dividend.
The debenture
holder gets the
return in form of
interest.
Certainty of Return No certainty of
returns in case of
loss.
The rate of interest is
fixed & is to be paid
even if there is no
profit.
Convertiblity Shares can’t be
converted into
debentures .
Debentures can be
converted into
shares.

28. Retained Earnings
• The portion of the profits which is not
distributed among the shareholders but
is retained and is used in business is
called Retained Earnings.
• As per Indian Companies Act. Companies
are required to transfer a part of their
profits in reserves.

29. Retained Earnings
• The amount so kept in the reserve may
be used to buy fixed assets. This is called
Internal Financing.
• Retained earnings can be used to fund
additional growth of business in areas
such as working capital , research and
developments & to pay off debts

30. Retained Earnings

31. Term Loans
• A term loan is a monetary loan that is
repaid in regular payments over a set
period of time. Term Loans usually lasts
between one and ten years. But may last
as long as 30 years in some cases. Term
Loan is a loan made by bank/financial
institutions.

32. Deffered Credit
• A deffered credit could mean money
received in advance of it being earned,
such as differed revenue, unearned
revenue or customer advances.