Sources of Business Finance — Flashcards

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Sources of business finance are divided into owned funds and borrowed funds. Owned funds include equity shares, preference shares, retained profits, global depository receipts, angel investors, ventur…

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Equity shares are shares that carry no preferential rights in dividend payment or repayment of capital. They are issued before any other type of shares. Dividend on equity shares is not fixed and is p…

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Equity shareholders are called owners because they hold the residual claim on the company. They receive dividend after preference shareholders and receive payment at winding up only after creditors an…

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Preference shares are shares that carry certain preferential rights. A fixed rate of dividend is paid on them before any dividend is paid on equity shares, and at winding up they are repaid before equ…

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Preference shareholders generally do not have voting rights. They can get voting rights if their dividends remain unpaid for the prescribed number of years.

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Debentures and bonds are documents or certificates issued by a company under its seal as acknowledgment of debt. They represent borrowed funds. They usually carry fixed interest, generally have no vot…

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Debenture interest is a fixed obligation of the company. It is payable every year irrespective of whether the company makes profit or suffers loss. This makes debentures different from share dividends…

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Debenture holders can take legal action against the company, including winding up, if interest or the borrowed sum is not paid in time. Debentures generally involve a charge on the assets of the compa…