why need finance in business and their different sources
Post on 14-Apr-2017
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Why Business Needs Finance and What are the Available
Sources of Finance
Presented By
Rakesh Kumar
Meaning of Business Finance
Money required for carrying out business activities is called business finance.
Businesses need money for…
For starting up Everyday bill payments
Expansion
Internal Growth
Take over bid
Replace machinery/equipment
Why Do Businesses Need Finance
Why Do Businesses Need Finance?Starting Up – Buildings, machinery, raw materials and office equipment
WORKING CAPITAL – Short term finance required for the day-to-day running of a business
Unforeseen Events – Sudden decline in sales, large customer fails to pay on time or pay expenses quickly.
Sources of Finance
Internal Sources of Finance
INTERNAL SOURCES OF FINANCE – Finance which is raised internally, it does not increase the debts of the business.
Examples:Retained profitPersonal savings Sale and leasebackSale of unwanted assets
External Sources of Finance
EXTERNAL SOURCES OF FINANCE – Finance provided by people or institutions outside the business, creates a debt that will require payment. Examples: Loans Overdraft Shares Debentures
Sources of FinanceFinance sources may be internal or external, but they may also be short, medium or long termShort Term: Finance the business for up to 1 year.Medium Term: Finance the business for up to 5 years .Long term: Finance the business for more than 5 years.
Short term FinanceBank overdraft facilityTrade credits Factoring Loans Creditors.
Medium term Finance
LeaseHire purchase Medium term loan
Long term FinanceSharesDebenturesLong term bank loansMortgageGrantsAdditional partners
Questionnaire 1.what is the primary source of short, medium & long credit? 2.Source of finance depends on ? 3.How to raise capital in business? 4. Are personal loans considered income? 5.what is the difference between shares & debentures?
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