Sources of Business Finance Test - 1

Unit Trust of India was established by the Government of India in 1964 under the Unit Trust of India Act, 1963.

The basic objective of UTI is to mobilise the community’s savings and channelise them into productive ventures.

it sanctions direct assistance to industrial concerns, invests in their shares and debentures, and participates with other financial institutions.

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 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.

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 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).

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.

GDR is issued in more than one country for raising shares globally through various stock exchanges.

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.

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.

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.