1. Financial Analysis
and
Sources of Finance

2. Financial Analysis

3. Financial Analysis
 Financial analysis is a process of discovering economic facts
about an enterprise and/ or a project on the basis of an
interpretation of financial data.
 Utility of Financial Analysis
 Appraisal of the project
 Performance index
 Index pitfalls
Utility of Financial Analysis and account statements
- Large scale production, Regulatory provision, Income tax
accounting, Executives, Bankers, Investors, Mercantile
credit

4. Financial Analysis Tools
 Trend Analysis
 Common size statement
 Ratio Analysis
 Fund flow analysis
 Break even Analysis
 Cash budgetary
 Proforma Statement

5. Different Sources of Finance
Sources of Finance
Internal Accruals
Preference Capital
Equity Capital
Debt
Equity
Term Loans
Debentures
Working Capital
Advances
Misc. Sources

6. Different Sources of Finance
Types of Industrial Finance
Long Term Finance
Medium Term Finance
Short Term Finance
Bank Credit
Trade Credit
Installment Credit
Customer Advances
Issue of Shares
Issue of Debentures
Loans from Banks and
other FIs
Public Deposits
Retained earning
Issue of Shares
Issue of Debentures
Loans from Financial
Institutions
Retained Earning

7. Different Sources of Finance
FIXED
State Govt.
WORKING CAPITLAL
SFCS Commercial Banks
SIDCS
COMMERCIAL
BANKS
INDUSTRIAL AND
INVESTMENT CORPN
CO-OPERATIVE
BANKS
INDIGENOUS
BANKS
MONEY
LENDER

8. Sources of Finance - Equity
 Authorized Capital
 Issued Capital
 Subscribed Capital
 Paid Up Capital
Rights to Equity Shareholders
 Right to Income
 Right to Control
 Pre-emptive Rights
 Right in Liquidation

9. Methods of Issuing Equity Capital
 Initial Public Offering
 Seasoned Offering
 Right Issue
 Private Placement
 Preferential Allotment

10. Comparative Analysis of Methods of
Issuing Equity Capital
Public
Issue
Right
Issue
Private
placement
Preferential
Allotment
Amount that
can be
Raised
Large Moderate Moderate Moderate
Cost of Issue High Negligible Negligible Low
Dilution of
Control
Yes No Yes Depends
Degree of
Under pricing
Large Irrelevant Small No
Market
Perception
Negative Neutral Small Neutral

11. Sources of Finance – Debentures
 Features:
 Types of Debentures:
 Deep Discount Bonds
 Convertible Debentures
 Floating Rate Bonds
 Secured Premium Notes

12. Working Capital Advances
 Forms of Bank Finance
 Cash Credit
 Bank overdraft
 Loans
 Purchase/Discount of Bills
 Letter of Credit

13. Sources of Finance-Misc. Sources
 Lease and Hire Purchase Finance
 Operating Lease
 Financial Lease
 Unsecured Loans and Deposits
 Special schemes of Institutions
 Bill Rediscounting Scheme
 Supplier’s Line of Credit
 Short term Loans from Financial Institutions
 Commercial Papers
 Factoring

14. CAPITALIZATION
OVERCATILASATION UNDERCAPITALISTIN
 A company is said to be an
overcapitalized company when it is
consistently unable to earn the
prevailing rate of return on the
capital invested.
 The earning capacity of this
company is low as compared to the
capital invested.
 It means that the capital is utilized
inefficiently.
 It indicates the weaker financial
position and unhealthy state of
affairs of the company.
The market value of the company’s
share is lower than the book value
of the share.
 A company is said to be an
undercapitalized when the rate of return
of return is exceptionally high as
compared to the rate earned by similar
companies in the same companies.
 The earning capacity of an this
company is exceptionally high in
comparison to the capital invested.
 It suggest that the capital is utilized
the most efficiently.
 It indicates a strong financial position
and healthy state of affairs of the
company.
 the market value of share of the
company is more than the book value of
the share.

15. Foreign Currency Term Loan Assistance
 Deferred Payment Guarantee Assistance
 Guarantee Assistance
 Underwriting Assistance
 Assistance by way of Direct subscription to Shares
 Soft Loan Assistance
 Assistance though Technical Development Funds
 Bills Rediscounting Scheme
 Seed Capital

16. Factoring
Services Provided by the Factors
1. Maintenance and Administration of sales ledger
2. Collection facility of account receivables
3. Financing facility
4. Assumption of Credit risk
5. Provision of advisory services

17. Factoring
 Recourse and Non recourse Factoring
 Disclosed and Undisclosed Factoring
 Advance and Maturity Factoring
 Full Factoring
 Domestic and Cross Border Factoring

18. Thank You