SOURCE OF BUSINESS

FINANCE
Source Of Business Finance
When choosing a source of finance, there are three
terms:
Short term Up to one year
Medium term Between one and five years
Long term Over five years
When deciding which term to choose, the business
should consider carefully:
What they need the money for
How much they have available to meet the
repayments

Source Of Business Finance
The main sources of finance available to business
are:
1. Short Term Finance
Trade Creditors
Bank Overdraft
Expenses Due

Source Of Business Finance
The main sources of finance available to business
(continued):
2. Medium Term Finance
Term Loan
Leasing
Hire Purchase

Source Of Business Finance
The main sources of finance available to business
(continued):
3. Long Term Finance
Ordinary Shares
Long Term Loans
Debentures
Public deposits


Source Of Business Finance
Long-term sources of finance
1. Equity Capital (Issue of Ordinary Shares)
The company sells shares in the business to raise
money
Dividends may be paid to the shareholders out of the
profits each year
No interest has to be paid on the money raised
Each new shareholder has a say in the running of the
company
SHARES
Source Of Business Finance
Share
A share is one of the units into which the total
capital of a company is divided. Sec 2 (46) of the
companies Act defined a share as a share in the share
capital of a company and include stock.
Kinds of Shares
Section 86 of the Companies Act 1956 recognizes
only two kinds of shares,
Equity or Ordinary Shares
Preference shares
Equity or Ordinary Shares
According to Section 85 of Companies Act 1956
an equity share is a share which is not a
preference share. These are shares having no
special rights, either for dividend or for repayment
of capital on winding up. The holders of equity
shares participate in the profits available after all
preferential rights have been fully satisfied. They
are not entitled to any fixed rate of dividend. They
are the real owners of the companies, having voting
rights.
Preference Shares
These are the shares which enjoy preferential
rights as to the payment of dividend at a fixed rate
during the life of the company and as to the return
of capital on winding up of the company over the
equity shares.
Type of Preference Shares
1. Cumulative Preference Shares
2. Non-cumulative Preference Shares
3. Participating Preference Shares
4. Non-participating Preference Shares
5. Redeemable Preference Shares
6. Irredeemable Preference Shares
7. Convertible Preference Shares
8. Non-Convertible Preference Shares

THANK YOU
Prepared by AJI R LAL