This document discusses various sources of finance for companies including equity shares, preference shares, retained earnings, and borrowed funds. It provides details on the different types of shares such as equity shares which are risk-bearing but provide ownership, and preference shares which receive fixed dividends but have no voting rights. The benefits of internal financing through retained earnings are outlined, such as accumulation of profits for investment without additional costs or obligations. Both the advantages and disadvantages of internal financing for the company, shareholders, and society are summarized.
2. SOURCES OF FINANCESOURCES OF FINANCE
SHORT TERM LONG TERM
TRADE CREDITS
CREDIT FROM SUPPLIERS
ADVANCE FROM DEALERS
PURCHASE OF FIXED ASSETS
FUNDING EXPANSIONS
DIVERSIFICATIONS
4. SHARESSHARES
• A SHARE HAS BEEN DEFINED BY THE VIETNAM’S BUSINESS
LAW
• SHARE MEANS SHARE IN THE SHARE CAPITAL OF THE
COMPANY & INCLUDES STOCK EXCEPT WHERE A
DISTINCTION BETWEEN STOCK & SHARE IS EXPRESSED
OR IMPLIED.
• THE LIABILITY OF THE SHAREHOLDER IS LIMITED TO THE
EXTENT OF THE FACE VALUE OF THE SHARES.
5. A SHAREHOLDER- MEMBER OF THE COMPANY
PRIVATE COMPANYPRIVATE COMPANY PUBLIC COMPANYPUBLIC COMPANY
MINIMUMMINIMUM
MAXIMUMMAXIMUM
22
5050
77
UNLIMITEDUNLIMITED
NUMBERS OF MEMBERS (MEMBERSHIP ) IN CASE OF A COMPANYNUMBERS OF MEMBERS (MEMBERSHIP ) IN CASE OF A COMPANY
6. AUTHORISED CAPITAL
ISSUED CAPITAL UNISSUED CAPITAL
SUBSCRIBED CAPITAL UNSUBSCRIBED CAPITAL
CALLED UP CAPITAL UNCALLED CAPITAL RESERVE CAPITAL
PAID UP CAPITAL CALLS IN ARREARS (UNPAID CAPITAL)
9. RIGHTS OF EQUITY SHAREHOLDERS
•THE RIGHT TO RESIDUAL INCOME
•RIGHT OF CONTROL
•PRE-EMPTIVE RIGHT
•RESIDUAL CLAIMANTS OVER ASSETS
10. ADVANTAGES OF EQUITY SHARES
TO THE ISSUING COMPANY-
•PERMANENT SOURCE OF CAPITAL
•NO FIX DIVIDEND
•CREDITWORTHYNESS OF THE COMPANY
11. DISADVANTAGES OF THE EQUITY SHARES
TO THE ISSUING COMPANY-
•NOT A TAX-DEDUCTIBLE EXPENSE
•FLOATATION COST IS HIGHER
•OVER CAPITALISATION
•DILUTION OF CONTROL
12. ADVANTAGES OF EQUITY SHARES
TO THE SHAREHOLERS-
•HIGHLY PROFITABLE SHRES
•OWNERS OF THE COMPANY
•LIMITED LIABILITY
13. DISADVANTAGES OF EQUITY SHARES
TO THE SHAREHOLERS-
•RISK CAPITAL
•CONTROL OVER THE MANAGEMENT
•FLUCTUATION
14. PREFERENCE SHARES
•PREFERENCE SHARES ARE THOSE SHARES WHICH ENJOY
PRIORITIES IN THE PAYMENT OF DIVIDEND AS WELL AS IN
THE REPAYMENT OF THE CAPITAL
•PREFERENCE SHAREHOLDERS ARE ENTITLED TO RECEIVE
A FIXED RATE OF DIVIDEND BEFORE THE DIVIDEND IS
PAID TO THE EQUITY SHARESHOLDERS.
15. TYPES OF PERFERENCE SHARES
1. PARTICIPATING AND NON PARTICIPATING SHARES
2.REDEEMABLE AND IRREDEEMABLE SHARES
3.CUMULATIVE AND NON CUMULATIVE SHARES
4.CONVERTIBLE AND NON CONVERTIBLE SHARES
16. FEATURES OF PREFERENCE SHARES-
•HYBRID SECURITY
•PREFERENCIAL RIGHTS
•PREFERENCIAL RIGHT ON FIXED DIVIDENDS.
•DEMAND UNPAID ARREARS
• VOTING RIGHTS
•CONVERSION OF SHARES
•RIGHT TO SHARE SURPLUS PROFITS
17. ADVANTAGES OF OWNED FUNDS
•INDICATES THE OWNERS STAKE AND INTEREST
•CUSHION FOR RAISING BORROWED FUNDS
•PROPOTION
•NO OBLIGATION
•SAFETY TO THE LENDERS
•RIGHT TO ACTIVE PARTICIPATION
18. RETAINED EARNINGS
INSTEAD OF DISRTIBUTING THE ENTIRE PROFITS TO THE
SHAREHOLERS, COMPANY RETAINS SOME PROFITS FOR
THE PURPOSE OF-
1.ACCUMULATIONS OF EARNINGS
2.INVESTMENT IN FIXED ASSETS
3.TO MEET WORKING CAPITAL NEEDS
19. MERITS OF PLOUGHING BACK OF PROFITS
TO THE COMPANY-
•ECONOMICAL
•EFFICIENCY AND PRODUCTIVITY
•CONFIDENCE OF SHAREHOLDERS
•ENHANCES CREDITWORTHYNESS
•LESS FINANCIAL RISK
•REPAYMENTS OF DEBENTURES AND TERM LOANS
20. •REDUCES THE RELIANCE
•HELPS EXPANSION AND DIVERSIFICATION
•HELPS AUTOMATION AND MODERNISATION
•USED TO MEET WORKING CAPITAL NEEDS
•FOLLOWS A STABLE DIVIDEND POLICY
•FREEDOM TO TAKE THEIR OWN DECISIONS
21. TO THE SHAREHOLDERS
•APPRECIATION IN SHARE VALUES
•BONUS SHARES
•REGULAR DIVIDENDS
•SECURITY VALUE
TO THE SOCIETY
•INCREASES CAPITAL FORMATION
•HELPS SPEEDY DEVELOPMENT
•BENEFITS TO THE CONSUMERS
•SOCIAL WELFARE ACTIVITIES
22. DEMERITS OF PLOGHING BACK OF PROFITS-
•DANGER OF MANIPULATION
•CHANCES OF OVER CAPITALISATION
•IMPROPER USE OF RETAIN EARNINGS
•NO SHARE OF DIVIDEND
•LEAD TO EXCESSIVE SPECULATIONS
•LEAD TO MORE DEMENDS FROM EMPLOYEES
•CONCENTRATION OF ECONOMIC POWER IN FEW HANDS
23. DETERMINANTS OF INTERNAL FINANCING
•TOTAL EARNING OF THE ENTERPRISE
•TAXATION POLICY OF THE GOVERNMENT
•DIVIDEND POLICY
•GOVERNMENT ATITUDES AND CONTROL
•OTHER FACTORS
24. MERITS OF INTERNAL FINANCING
ADVANTAGES RO THE COMPANY-
•BEST AND CHEAPEST SOURCE OF FINANCE
•STABLE DIVIDEND POLICY
•INCREASE IN MORALE OF MANAGEMENT
•SAFETY FROM TRADE CYCLES
25. ADVANTAGES TO THE SHAREHOLDER
•INCRAESE IN THE VALUE OF THE SHARE
•INCREASE IN EQUITY
•INCREASE IN THE COLLATERAL VALUE OF SHARES
ADVANTAGES TO THE SOCIETY
•CAPITAL FORMATION
•INCRAESE IN SOCIAL WELFARE
26. DEMERITS OF INTERNAL FINANCING
•DANGER OF MONOPOLY
•FEAR OF OVER-CAPITALISATION
•LOSS OF SHAREHOLDERS