Sources of Business Finance Test - 4

• State Industrial Development Corporations were established by different states for the purpose of promoting industrial development in their respective states.
• The objectives of the SIDCs differ from one state to another.
• At present, 22 such SIDCs are functioning in India.

• The local currency shares of a company are delivered to the depository bank.
• The depository bank issues depository receipts against these shares.
• Such depository receipts denominated in US dollars are known as Global Depository Receipts (GDR).

• A holder of GDR can at any time convert it into the number of shares it represents.
• The holders of GDRs do not carry any voting rights but only dividends and capital appreciation.

• A commercial bank is a type of financial institution that provides services such as accepting deposits, making business loans and offering basic investment products.
• Some examples of commercial bank are as follow: 
  • Allahabad Bank.
  • Andhra Bank.
  • Bank of Baroda.
  • Bank of India.
  • Bank of Maharashtra.
  • Canara Bank.
  • Central Bank of India.
  • Punjab National Bank
  • State Bank of India

• The sources for raising borrowed funds include loans from commercial banks, loans from financial institutions, issue of debentures, public deposits and trade credit.
• A fixed rate of interest is paid by the borrowers on such funds.
• Such sources provide funds for a specified period, on certain terms and conditions and have to be repaid after the expiry of that period.

• Many firms issue convertible zero interest debentures in order to avoid paying interest over the period till conversion happens. After conversion, the dividend applicable on paid-up share capital will be paid.
• Mahindra and Mahindra was the first company in India to issue convertible zero interest debentures in January,1990.

Dividend is paid out of the profit of the company. Dividend is that part of the profit which is paid to the shareholders (Equity and Preference shareholders). Investors also see "dividend payment" as a sign of a company's strength.

• The capital obtained by issue of shares is known as share capital.
• The capital of a company is divided into small units called shares.
• Each share has its nominal value. For example, a company can issue 1,00,000 shares of Rs. 10 each for a total value of Rs. 10,00,000.
• The person holding the share is known as shareholder.
• There are two types of shares normally issued by a company. These are equity shares and preference shares.

Dividend payable to equity shareholders may keep fluctuating. Moreover It is not compulsory to pay dividend to equity shareholders.  

• Lease  is an agreement between lessor (owner) and lessee for use of an asset on some periodic payment (lease rental).
• it is a renting of an asset for some specified period.The owner of the assets is called the‘lessor’ while the party that uses the assets is known as the ‘lessee’
• The lessee pays a fixed periodic amount called lease rental to the lessor for the use of the asset.
• At the end of the lease period, the asset goes back to the lessor.
• Such type of financing is more prevalent in the acquisition of such assets as computers and electronic equipment which become obsolete quicker because of the fast changing technological developments.