Risk and sources of finance

Jun 27th, 2015
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Time to Finance Short-Term (ST) financing »Financing for one year or less Medium-Term (MT) Financing »Financing for one to five years Long-Term (LT) Financing »Financing for over 5 yearsCumulative Preference Shares: Cumulative preference shares are those shares on which fixed dividend cumulate till it is fully paid up. It means that on these shares, if a dividend is not paid in one year then that dividend will be combined in the next year. For e.g. In the year 2005, if company is unable to pay dividend of Rs.5000 then in the year 2006, the company have to pay 5000 of year 2005 and then 5000 of year 2006. Non-cumulative Preference Share: Such shares do not have the privilege of the accumulation of unpaid dividend. In other words, if profits during a particular year is not sufficient, the arrear lapses.

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Time to FinanceShort-Term (ST) financing Financing for one year or lessSources of FinanceMedium-Term (MT) Financing Financing for one to five yearsPrepared byProf. Md. Mizanur RahmanLong-Term (LT) Financing(PhD, MBA) Financing for over 5 yearsDepartment of MarketingDhaka UniversityAdd-1Add-2Sources of financeInternal Sources of FinanceSources of finance are classed as being eitherinternal or external.Six major internal sources of finance: OwnersInternal sources:finance from withinthe business.External sources:finance from outsidethe business.Capital (equity capital)Retained Earnings (equity capital)Provident Fund of StaffsOutstanding Expense (Accruals)Sale of AssetsDebt CollectionAdd-3Add-4Internal Sources: Owners CapitalAdvantagesFund comes fromowners ownsavingsThis is a LT fundInternal Sources: Owners CapitalEasy to access No money to pay back No interest to payThis fund varies with the types of businessLimited fund is collected from ownersDisadvantagesSole proprietorshipPartnershipFund is collected by all or few partnersRisk of losing allsavings Limited fundPrivate and Public Ltd. CompanyEntrepreneurs fund is the only internal source ofLT fund at the initial stageAdd-5Add-61Internal Sources: Retained EarningsPart of profit which is invested in busines

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