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Sources OF Finance Sources OF Finance

This document discusses various sources of finance for businesses. It categorizes sources as either spontaneous or negotiated. Spontaneous sources include trade creditors and supplier credit. Negotiated sources require negotiation with lenders and include bank loans, debentures, public deposits, and retained earnings. Short-term sources are discussed like overdrafts, cash credits, bill discounting, and internal sources like retained earnings and depreciation funds. Long-term sources include issuing shares and debentures on the stock market. The document provides an overview of different financing options for businesses.

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5K views26 pages

Sources OF Finance Sources OF Finance

This document discusses various sources of finance for businesses. It categorizes sources as either spontaneous or negotiated. Spontaneous sources include trade creditors and supplier credit. Negotiated sources require negotiation with lenders and include bank loans, debentures, public deposits, and retained earnings. Short-term sources are discussed like overdrafts, cash credits, bill discounting, and internal sources like retained earnings and depreciation funds. Long-term sources include issuing shares and debentures on the stock market. The document provides an overview of different financing options for businesses.

Uploaded by

yogisawant
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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SOURCES

OF
FINANCE
PRESENTED BY

 Naresh Salvi (41).


 Yogita Sawant (42).
 Nadeem Sayyaed (43).
 Darshan Shah (44).
 Priyanka Shah (45).

(M.M.S. ,1st Year)


Accademic Year : 2009-10.
University Of Mumbai

SUBMITTED TO,
Prof. Harnesh sir .
Various sources of short term and long term finance
Finance by financial institution

LEARNING OBJECTIVE
INTRODUCTION

It is rightly said that finance is the life-blood


of business. No Business can be carried on
without source of finance . The financial
manager is mainly responsible for raising the
required finance for the business. There are
several sources of Finance and as such the
finance has to be raised from the right kind of
source.
SOURCES OF
FINANCE

SPONTANEOUS NEGOTIATED
SOURCES SOURCES.
SOURCES OF FINANCE.

There are different sources of Finance .

Hence Finance may be classified into the following:

 SPONTANEOUS SOURCE.
 NEGOTIATED SOURCE.
 Spontaneous finance: Finance which naturally
arises in the course of business is called as “spontaneous
financing.”
Trade creditors, credit from employees, credit from
suppliers of services etc are the examples of spontaneous
financing.
 Negotiated financing: Financing which has to be
negotiated with lenders, say commercial banks, financial
institutions, general public are called as “negotiated
financing.”
This financing may be short term in nature or long term.
Security financing

Issue of shares & debenture

shares-
The Total share capital of the company divided into large
number of parts of equal face value, each of such part is
called share.
Equity Shares

 Equity share capital represents the owners equity.

Important features of equity shares


The rate of dividend fluctuates depending upon the
profits of the company
This share holders enjoy normal voting rights
It is issued for a face value of Rs 10
Preference Shares

 Preference share represents that part of share capital of


a company , which carries preferential rights.

Important features of preference shares


The rate of dividend remains fixed as it is decided at the
time of issue
This share holders do not have normal voting rights
except on those matters which affect their interest

It is issued for a face value of Rs 100


DEBENTURE

• Debenture is a certificate issued by a company under its common


seal acknowledging a debt by its holders.

• Important features of debentures:


Debentures carry interest at fix rate
Interest on debenture must be paid even if there are no profits, and
interest on debenture is a deductible expense for income tax purposes
Amount of debentures must be redeemed as per terms of agreement
In India ,debentures do not enjoy voting rights
Loan Financing

A Business enterprise requires short-term and


long-term finance. It may raise financial
resources by raising short-term loans and long-
term loans.

 Short-term Sources.
 Long-term Sources.
Short-term Sources
Short– term Sources
Short– term Sources
Short-term external sources

 Bank over-draft.
If the borrower requires temporary finance ,
the banker may allow him to overdraw on his
account with or without security
 Cash credit
Cash credit is a financial arrangement
through which the commercial banks allow the
borrower to the borrow money up to a
certain limit
 Public deposit
Business firm are raising short-term finance
from their member , directors and the
general public.

 Bills discounting
The commercial banks advance to the
borrower by discounting his bill.
 Short-term loans
The bankers makes a lump-sum payment to
the borrower or credit his deposit account
with the money advanced..
Internal Financing
Finance can be raised through internal sources such as , retained
earnings and depreciation fund.

Retained Earnings :
Retained earnings is refers to accumulation of profits by a company
to finance its developmental activities or repay loans.

Depreciation fund :
Depreciation means decrease in value of asset.It results into
reduction of taxable income and hence income tax liability for
the period is reduced.
OTHER SOURCES OF FINANCE.
 Accrued Expenses and Deferred Income
 Advances from customers
 Bank advances
 Inter-corporate Loans and Deposits
 Commercial paper
 Funds generated from operations
 Retained profit
 Depreciation provision
 Amortization provision
 Deferred Tax Payments
 Public Deposits
CONCLUSION

 To conclude this project based on Sources Of


finance as we have seen throughout this project
that financing is very important for all firms
big or small. The Indian banks and financial
institutions have also been financing Funds to
the borrowers in different forms. From this
project, we had came to know how important is
Sources Of finance, its overall view etc.
By this project work, it gave us a brief
structure of Sources Of financing. Thus this
also provided me valuable information to gain
knowledge of Finance requirement of the firm.
THANK YOU

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