Sources of Business Finance Test - 2

The share capital is contributed by the shareholders and a share indicate how much ownersip you have in the company.thus equity shareholders are called owners.

A type of preference shares, the capitals of which are to be paid back to the preference shareholders after expiry of some specified period known as redeemable preference shares.

The funds required for day to day operations i.e. to meet expenses like wages, salary, rent, insurance etc. and investment in current assets i.e. inventory, bills receivable etc.

American Depository Receipts are issued by a non US company to American citizens to obtain foreign capital.These can be listed and traded on a stock exchange of USA.

Company issues a deposit receipt as acknowledgement of debt.  The rate of interest is higher than bank deposits. Therefore company can easily raise finance.

Lease is an agreement between two parties i.e. Lessor and Lessee for the use of asset in return of periodic payment and for a specified period.

Debentures come under borrowed funds and are issued for a specified period and to be paid back to the debenture holders after that period.

Factors discount the bills and holds the responsibility of credit control and debt collection from the buyer.

The RBI regulates commercial papers. CP is a source of short term finance. The maturity period of CP ranges from 90 days to 364 days.

These sources are generated by the organisation itself e.g. ploughing back of profits, collection of debtors and receivables.