Beruflich Dokumente
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-CH.PADMAVATI
INTRODUCTION
Business finance refers to money and credit
involved in business. It involves procurement utilization of funds for business purposes. Sources of finance are Owners funds Borrowed funds
BORROWED FUNDS
Borrowed funds consists of the amount
raised by way of loans and credit.
Partnership Firm
Company
Borrowings raised
by issue of debentures, through loans or credit.
CHARACTERISTICS
Fixed obligations Not permanent capital
No Right of control over management
MERITS
Tax advantage Advantage of Trading on Equity
No Risk of Loss of Control Lower Cost of Debt
LIMITATIONS
Involves fixed obligations Requires adequate security Exists the risk of insolvency Increases the risk of owners
Debentures Loans
Public deposits
DEBENTURES
A debenture is a written instrument acknowledging a
debt and containing provisions as regards the repayment of principle and the payment of interest at a fixed rate. Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's financial statements.
PUBLIC DEPOSITS
The term 'public deposit' implies any
money received by a company through the deposits or loans collected from the public. The public includes the general public, employees and shareholders of the company but excludes the money received in the form of shares and debentures.