SOURCES OF FINANCE.....

SOURCES OF FINANCE.....

• 1.
  SOURCES OF FINANCE PresentedBy: Kaveri Hazarika Arup Bordoloi Kaustav Kashyap Nazrul Islam
• 2.
  Why Finance isRequired? • For Long-Term Investment • For Liquidity or Short-Term Commitments • For Solvency
• 3.
  Types of funds Longterm sources Long term funds Fixed Capital Solvency Short term sources Short term funds Working Capital Liquidity
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  Sources of Long-TermFinance • Equity Shares • Preference Shares • Debentures • Long-Term Bank Loan
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  Sources of Short-TermFinance • Trade Credit • Installment credit • Advances • Bank credit –Overdraft/ Cash Credit –Bills Discounted –Short-Term Loan • Commercial Paper
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  Trade Credit • TradeCredit refers to the credit extended by the suppliers of goods in normal course of business. • Advantages: 1. Easy and Convenient 2. Flexible (Credit increases with growth of firm) 3. Informal and Spontaneous source • Disadvantages: Higher prices by suppliers & loss of cash discount
• 7.
  Installment Credit andAdvances • In Installment credit, assets are purchased and possession of goods is taken immediately but the payment is made over a pre- determined period of time • In Advances, some business houses get advances from their customers and agents against orders.
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  Bank Credit • Overdraft/Cash Credit In cash credit a bank allows its customers to borrow money upto a certain limit against some tangible securities. In Overdraft a current account holder withdraws money more than the balance upto a certain limit • Short-Term Loan • Bills Discounted Here seller draws a bill of exchange on the buyer of goods on credit. Bank purchases the bill and credits the customer’s account with amount of bills less discount.
• 9.
  Commercial Paper • Itis short term promissory notes issued by firms with high credit rating. • It is sold at discount from face value and redeemed at face value on its maturity.
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  Internal Sources ofFinance • Ploughing Back of Profits i.e. Retained Earnings • Bonus Shares • Sale of Existing Assets • Depreciation
• 11.
  Important Considerations forChoosing Appropriate Source of Finance • Fixed Asset or Working Capital • Amount of Finance Required • Cost of Raising Finance i.e. Floatation Cost • Cost of Capital • Tax Planning