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Sources of Finance
Classification of sources
According to
period
Short-term
sources
Long-term
Sources
According to
ownership
Owned
capital
Borrowed
capital
According to
source
Internal
sources
External
sources
According to
mode of
finance
Security
financing
Loan
financing
According to Period
Short Term
Bank credit
Customer
advances
Trade credit
Factoring
Deferred incomes
Commercial paper
Long Term
Shares
Debentures
Loans
Retained Earnings
Shares
Equity shares
Deferred shares
No par shares
Preference shares
Cumulative & non-cumulative
Redeemable & irredeemable
Participative & non-participative
Convertible & non-convertible
Characters
Equity shares
 Maturity
 Claim on assets
 Voting rights
 Pre-emptive rights
 Limited liability
Preference shares
 Maturity
 Claims on income
 Claims on assets
 Control
 Hybrid form of securities
Debentures
 Simple or unsecured
debentures
 Secured or mortgaged
debentures
 Bearer debentures
 Registered debentures
 First & second
debentures
 Redeemable debentures
 Irredeemable debentures
 Convertible debentures
 Zero Coupon debentures
 Guaranteed debentures
 Collateral Debentures
Features
Maturity
Claims on income
Claims on assets
Control
Call feature
Difference between shares & debentures
 Nature (capital or debt)
 Return
 Rate of return
 Charges again P&L or appropriation a/c
 Voting rights
 Redemption
 Treatment at the time of liquidation
Classification of sources
According to
period
Short-term
sources
Long-term
Sources
According to
ownership
Owned
capital
Borrowed
capital
According to
source
Internal
sources
External
sources
According to
mode of
finance
Security
financing
Loan
financing
According to Ownership
Owned Capital
 Equity shares
 Deferred shares
 No par shares
 Retained Earnings
Borrowed capital
 Debentures
 Loans from banks
 Loans from FI
Classification of sources
According to
period
Short-term
sources
Long-term
Sources
According to
ownership
Owned
capital
Borrowed
capital
According to
source
Internal
sources
External
sources
According to
mode of
finance
Security
financing
Loan
financing
According to Source
Internal
 Retained Earnings
 Right shares
 Bonus shares
External
 Debentures
 Loans
 Factoring
 Public deposits
 Commercial papers
Classification of sources
According to
period
Short-term
sources
Long-term
Sources
According to
ownership
Owned
capital
Borrowed
capital
According to
source
Internal
sources
External
sources
According to
mode of
finance
Security
financing
Loan
financing
According to Source of finance
Security
 Shares
 Debentures
 Commercial papers
Loan
 Loans from Banks
 Loans from FI
 Customer advances
 Trade credit
 Factoring
Other Sources
Lease Financing
 Operating lease
 Financial Lease
 Sale and lease back
Venture Capital Financing
 Early stage financing
 Expansion financing
 Buyout financing
Hire Purchase Financing
Installment purchase
Sale of assets
Foreign Sources
Depository Reciepts

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Sources of finance

  • 2. Classification of sources According to period Short-term sources Long-term Sources According to ownership Owned capital Borrowed capital According to source Internal sources External sources According to mode of finance Security financing Loan financing
  • 3. According to Period Short Term Bank credit Customer advances Trade credit Factoring Deferred incomes Commercial paper Long Term Shares Debentures Loans Retained Earnings
  • 4. Shares Equity shares Deferred shares No par shares Preference shares Cumulative & non-cumulative Redeemable & irredeemable Participative & non-participative Convertible & non-convertible
  • 5. Characters Equity shares  Maturity  Claim on assets  Voting rights  Pre-emptive rights  Limited liability Preference shares  Maturity  Claims on income  Claims on assets  Control  Hybrid form of securities
  • 6. Debentures  Simple or unsecured debentures  Secured or mortgaged debentures  Bearer debentures  Registered debentures  First & second debentures  Redeemable debentures  Irredeemable debentures  Convertible debentures  Zero Coupon debentures  Guaranteed debentures  Collateral Debentures
  • 7. Features Maturity Claims on income Claims on assets Control Call feature
  • 8. Difference between shares & debentures  Nature (capital or debt)  Return  Rate of return  Charges again P&L or appropriation a/c  Voting rights  Redemption  Treatment at the time of liquidation
  • 9. Classification of sources According to period Short-term sources Long-term Sources According to ownership Owned capital Borrowed capital According to source Internal sources External sources According to mode of finance Security financing Loan financing
  • 10. According to Ownership Owned Capital  Equity shares  Deferred shares  No par shares  Retained Earnings Borrowed capital  Debentures  Loans from banks  Loans from FI
  • 11. Classification of sources According to period Short-term sources Long-term Sources According to ownership Owned capital Borrowed capital According to source Internal sources External sources According to mode of finance Security financing Loan financing
  • 12. According to Source Internal  Retained Earnings  Right shares  Bonus shares External  Debentures  Loans  Factoring  Public deposits  Commercial papers
  • 13. Classification of sources According to period Short-term sources Long-term Sources According to ownership Owned capital Borrowed capital According to source Internal sources External sources According to mode of finance Security financing Loan financing
  • 14. According to Source of finance Security  Shares  Debentures  Commercial papers Loan  Loans from Banks  Loans from FI  Customer advances  Trade credit  Factoring
  • 15. Other Sources Lease Financing  Operating lease  Financial Lease  Sale and lease back Venture Capital Financing  Early stage financing  Expansion financing  Buyout financing Hire Purchase Financing Installment purchase Sale of assets