Sources of Finance

SOURCES SOURCES OF OF

FINANCEFINANCE

SOURCES SOURCES OF OF

FINANCEFINANCE

PRESENTED BY PRESENTED BY

Naresh Salvi (41).Naresh Salvi (41). Yogita Sawant (42).Yogita Sawant (42). Nadeem Sayyaed (43).Nadeem Sayyaed (43). Darshan Shah (44).Darshan Shah (44). Priyanka Shah (45).Priyanka Shah (45).

(M.M.S. ,1(M.M.S. ,1stst Year) Year) Accademic Year : 2009-10.Accademic Year : 2009-10. University Of Mumbai University Of Mumbai

SUBMITTED TOSUBMITTED TO,, Prof. Prof.

Harnesh sir .Harnesh sir .

LEARNING OBJECTIVE

Various sources of short term and long term finance

Finance by financial institution

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 OFFINANCE

SPONTANEOUSSOURCES

NEGOTIATEDSOURCES.

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 sourcesBank 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