concept of financial_research

May 28th, 2015
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A. T. Still University
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The sources from which a business meets its financial requirements can be classified as follows: 1. According to period A. Long term sources i.e. shares, debentures, long-term loans etc B. Short term sources i.e. advances from commercial banks, public deposits, advances from customers and trade creditors etc

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Unit IChapter 2Sources of finance The sources from which a business meets itsfinancial requirements can be classified asfollows: 1. According to periodA. Long term sources i.e. shares, debentures, longterm loans etcB. Short term sources i.e. advances fromcommercial banks, public deposits, advancesfrom customers and trade creditors etc2. According to ownershipA. Own capital i.e. share capital, retainedearnings and surpluses etcB. Borrowed capital i.e. debentures, publicdeposits and loans etc3. According to source of generationA. Internal sources i.e. retained earnings anddepreciation funds etcB. External source i.e. securities like shares anddebentures, loans, etcEquity financing They represent the ownership position in acompany. The holders of the ordinary shares, calledshareholders, are the legal owners if thecompany. Ordinary shares are also called permanentcapital since they dont have a maturity period. An ordinary share is also known as variableincome security.Features of ordinary shares Claim on income(last) Claim on assets(last) Right to control (voting rights) Pre-emptive rights (right issues) Limited liabilityDebenture financing A debenture is a long term promissory notefor raising loan capital. The firm promises to pay interest andprincipal. The purchasers of debentures are calleddebenture holders.Features of debenturesInterest rates (fixed, tax deductible

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