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Presented By: Jinal Lad

Introduction
It is rightly said that finance is the lifeblood
of business.
No Business can be carried on without
source of finance.
There are several sources of Finance and as
such the finance has to be raised from the
right kind of source.

Brief Introduction

Finance is not just needed when starting a new business but

you may be required to seek further finance even if your
business is well established i.e. For further expansion, R&D,
new product launch, legal fees, fines etc.

No matter what business you are in, you will always have to
ensure your business is adequately financed (Liquidity).

There are two categorise of finance methods and they are

either internal or external. Within these two categorise the
method of financing could be short, medium or long term.

Classification of sources
According to
period

According to
ownership

According to
source

According to
mode of
finance

Short-term
sources

Owned
capital

Internal
sources

Security
financing

Long-term
Sources

Borrowed
capital

External
sources

Loan
financing

According to Ownership
Owned Capital

Ordinary/Equity shares
Preference shares
Founders /Deferred shares
Retained Earnings

Ownership
capital

Nonownership
capital

External source
s

Owners Fund
Owners fund or owners capital refers to
fund invested by the owners of the
company.
Owners fund comprise of preference
shares, equity shares, retained earnings.

Equity Shares
Equity shares were earlier known as ordinary
shares. The holders of these shares are the real
owners of the company.
They have a voting right in the meetings of
holders of the company. They have a control
over the working of the company.
Equity shareholders are paid dividend after
paying it to the preference shareholders.

Preferred Shares
Preferred shares represent an ownership share
in a company -- in other words, a claim on its
assets (property) and earnings.
While preferred shares usually do not carry the
same voting rights as common shares, they do
have priority when it comes to dividends
and bankruptcy.

Founders / Deferred Shares

These shares were earlier issued to Promoters
or Founders for services rendered to the
company.
These shares were known as Founders Shares
because they were normally issued to
founders.
These shares rank last so far as payment of
dividend and return of capital is concerned.

Retained Earnings
Retained earnings means that part of
trading profits which is not distributed in
the form of dividends but retained by
directors for future expansion of the
company.

Merits Of Owned Fund

Merits : Ready Availability Free to use
Avoid cost of taking loan
Less risk financing in smaller increments
which you can afford
Avoid commitment of loan, no repayment
of loan, no interests to pay extra.

Demerits Of Owned Fund

Demerits : Limited access to needed capital
Business growth is slower
Limited ability to respond to new
investment opportunities.

Reference

http://www.scribd.com/doc/39664871/
Wikipedia page: Sources of Finance

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Thank You.