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Ch 15: Financing of Business (15.5: Sources of Short-Term Finance (2.Bank…
Ch 15: Financing of Business
15.1: Business Finance
1.To purchase fixed assets
2.To meet day-to-day expenses
3.To fund business growth
4.To bridge the time gap between production and sales
5.To meet contingencies
6.To avail of business opportunities
15.2: Importance of Business Finance
(a)Need for Large Scale Operation
(b)Use of Modern Technology
(c)Promotion of sales
15.3: Types of Business Finance
Short-Term Finance
Medium-Term Finance
Long-Term Finance
Fixed vs. working capital
15.4: Sources of Finance
Proprietorship's sources
(a)Own Savings
(b)Friends and Relatives
(c)Moneylenders
(d)Commercial Banks
(e)Finance Companies
(f)Manufactures and Suppliers
(g)Retained Profits
Company's sources of Funds
(a)Capital Market
(b)Financial Institutions
(c)Public Deposits
(d)Commercial Banks
(e)Leasing Companies
(f)Investment Trusts
(g)Retained Profits.
15.5: Sources of Short-Term Finance
1.Trade Credit
2.Bank Credit
(a)Loans and Advances
(b)Cash Credit
(c)Bank Overdraft
(d)Discounting of Bill
3.Factoring
4.Customers’ Advances
5.Installment Credit
6.Loans from Unorganised Sectors
7.Inter Corporate Deposits (ICDs)
Call Deposits
3 Month Call Deposits
6 Month Call Deposit
15.6: Types of security required
(a)Moveable Goods
(b)Shares
(c)Documents of Title to Goods
(d)Fixed Deposit Receipts
(e)Life Insurance Policies
(f)Jewellery or Precious Metals
(g)Other Securities
15.8: Long-term Finance
(i)Issue of Shares
(ii)Issue of Debentures
(iii)Loans from financial institutions
(iv)Public Deposits
(v)Retention of Profit
(vi)Lease financing
(vii)Foreign InvestmentLet