finding the sources_of_finance

Jun 27th, 2015
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Academy of Art University
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This chapter provides an overview of the various sources from where funds can be procured for starting as also for running a business. It also discusses the advantages and limitations of various sources and points out the factors that determine the choice of a suitable source of business finance.

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CHAPTER 8SOURCESOFBUSINESS FINANCELEARNING OBJECTIVESAfter studying this chapter, you should be able to:state the meaning, nature and importance of business finance;classify the various sources of business finance;evaluate merits and limitations of various sources of finance;identify the international sources of finance; andexamine the factors that affect the choice of an appropriate sourceof finance.182BUSINESS STUDIESMr. Anil Singh has been running a restaurant for the last two years. The excellentquality of food has made the restaurant popular in no time. Motivated by thesuccess of his business, Mr. Singh is now contemplating the idea of opening achain of similar restaurants at different places. However, the money availablewith him from his personal sources is not sufficient to meet the expansionrequirements of his business. His father told him that he can enter into apartnership with the owner of another restaurant, who will bring in more fundsbut it would also require sharing of profits and control of business. He is alsothinking of getting a bank loan. He is worried and confused, as he has no ideaas to how and from where he should obtain additional funds. He discusses theproblem with his friend Ramesh, who tells him about some other methods likeissue of shares and debentures, which are available only to a company form oforganisation. He further cautions him that each method has its own advantagesand limita

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