2. SOURCES OF FINANCE
SHORT TERM LONG TERM
TRADE CREDITS
CREDIT FROM SUPPLIERS
ADVANCE FROM DEALERS
PURCHASE OF FIXED AS
FUNDING EXPANSIONS
DIVERSIFICATIONS
4. SHARES
• A SHARE HAS BEEN DEFINED BY THE INDIAN CO
ACT, 1956
• SHARE MEANS SHARE IN THE SHARE CAPITAL O
COMPANY & INCLUDES STOCK EXCEPT WHERE
DISTINCTION BETWEEN STOCK & SHARE IS EXP
OR IMPLIED.
• THE LIABILITY OF THE SHAREHOLDER IS LIMIT
EXTENT OF THE FACE VALUE OF THE SHARES.
5. A SHAREHOLDER- MEMBER OF THE COMP
PRIVATE COMPANY PUBLIC COMPANY
MINIMUM
MAXIMUM
2
50
7
UNLIMITED
NUMBERS OF MEMBERS (MEMBERSHIP ) IN CASE OF A COMPANY
6. AUTHORISED CAPITAL
ISSUED CAPITAL UNISSUED CAPITAL
SUBSCRIBED CAPITAL UNSUBSCRIBED CAPITAL
CALLED UP CAPITAL UNCALLED CAPITAL RESERVE CAPITAL
AID UP CAPITAL CALLS IN ARREARS (UNPAID CAPITAL)
9. RIGHTS OF EQUITY SHAREHOLDERS
•THE RIGHT TO RESIDUAL INCOME
•RIGHT OF CONTROL
•PRE-EMPTIVE RIGHT
•RESIDUAL CLAIMANTS OVER ASSET
10. ADVANTAGES OF EQUITY SHARES
TO THE ISSUING COMPANY-
•PERMANENT SOURCE OF CAPITAL
•NO FIX DIVIDEND
•CREDITWORTHYNESS OF THE COMP
11. DISADVANTAGES OF THE EQUITY SHARE
TO THE ISSUING COMPANY-
•NOT A TAX-DEDUCTIBLE EXPENSE
•FLOATATION COST IS HIGHER
•OVER CAPITALISATION
•DILUTION OF CONTROL
12. ADVANTAGES OF EQUITY SHA
TO THE SHAREHOLERS-
•HIGHLY PROFITABLE SHRES
•OWNERS OF THE COMPANY
•LIMITED LIABILITY
13. DISADVANTAGES OF EQUITY SHAR
TO THE SHAREHOLERS-
•RISK CAPITAL
•CONTROL OVER THE MANAGE
•FLUCTUATION
14. PREFERENCE SHARES
•PREFERENCE SHARES ARE THOSE SHARES W
PRIORITIES IN THE PAYMENT OF DIVIDEND AS
THE REPAYMENT OF THE CAPITAL
•PREFERENCE SHAREHOLDERS ARE ENTITLED
A FIXED RATE OF DIVIDEND BEFORE THE DIV
PAID TO THE EQUITY SHARESHOLDERS.
15. TYPES OF PERFERENCE SHARES
1.PARTICIPATING AND NON PARTICIPATING S
2.REDEEMABLE AND IRREDEEMABLE SHAR
3.CUMULATIVE AND NON CUMULATIVE SHA
4.CONVERTIBLE AND NON CONVERTIBLE SH
16. FEATURES OF PREFERENCE SHARES-
•HYBRID SECURITY
•PREFERENCIAL RIGHTS
•PREFERENCIAL RIGHT ON FIXED DIVIDENDS.
•DEMAND UNPAID ARREARS
• VOTING RIGHTS
•CONVERSION OF SHARES
•RIGHT TO SHARE SURPLUS PROFITS
17. ADVANTAGES OF OWNED FUNDS
•INDICATES THE OWNERS STAKE AND
•CUSHION FOR RAISING BORROWED F
•PROPOTION
•NO OBLIGATION
•SAFETY TO THE LENDERS
•RIGHT TO ACTIVE PARTICIPATION
18. RETAINED EARNINGS
INSTEAD OF DISRTIBUTING THE ENTIRE PRO
SHAREHOLERS, COMPANY RETAINS SOME PR
THE PURPOSE OF-
1.ACCUMULATIONS OF EARNINGS
2.INVESTMENT IN FIXED ASSETS
3.TO MEET WORKING CAPITAL NEEDS
19. MERITS OF PLOUGHING BACK OF PROFITS
TO THE COMPANY-
•ECONOMICAL
•EFFICIENCY AND PRODUCTIVITY
•CONFIDENCE OF SHAREHOLDERS
•ENHANCES CREDITWORTHYNESS
•LESS FINANCIAL RISK
•REPAYMENTS OF DEBENTURES AND T
20. •REDUCES THE RELIANCE
•HELPS EXPANSION AND
DIVERSIFICATION
•HELPS AUTOMATION AND
MODERNISATION
•USED TO MEET WORKING CAPITAL
NEEDS
•FOLLOWS A STABLE DIVIDEND
POLICY
•FREEDOM TO TAKE THEIR OWN
21. TO THE SHAREHOLDERS
•APPRECIATION IN SHARE VALUES
•BONUS SHARES
•REGULAR DIVIDENDS
•SECURITY VALUE
TO THE SOCIETY
•INCREASES CAPITAL FORMATION
•HELPS SPEEDY DEVELOPMENT
•BENEFITS TO THE CONSUMERS
•SOCIAL WELFARE ACTIVITIES
22. DEMERITS OF PLOGHING BACK OF PROF
•DANGER OF MANIPULATION
•CHANCES OF OVER CAPITALISATION
•IMPROPER USE OF RETAIN EARNINGS
•NO SHARE OF DIVIDEND
•LEAD TO EXCESSIVE SPECULATIONS
•LEAD TO MORE DEMENDS FROM EMPLOYE
•CONCENTRATION OF ECONOMIC POWER IN
23. DETERMINANTS OF INTERNAL FINANCIN
•TOTAL EARNING OF THE ENTERPR
•TAXATION POLICY OF THE GOVER
•DIVIDEND POLICY
•GOVERNMENT ATITUDES AND CON
•OTHER FACTORS
24. MERITS OF INTERNAL FINANCING
ADVANTAGES RO THE COMPANY-
•BEST AND CHEAPEST SOURCE OF FI
•STABLE DIVIDEND POLICY
•INCREASE IN MORALE OF MANAGE
•SAFETY FROM TRADE CYCLES
25. ADVANTAGES TO THE SHAREHOLDER
•INCRAESE IN THE VALUE OF THE SHARE
•INCREASE IN EQUITY
•INCREASE IN THE COLLATERAL VALUE
ADVANTAGES TO THE SOCIETY
•CAPITAL FORMATION
•INCRAESE IN SOCIAL WELFARE
26. DEMERITS OF INTERNAL FINANCING
•DANGER OF MONOPOLY
•FEAR OF OVER-CAPITALISAT
•LOSS OF SHAREHOLDERS