...funds to cover the cost of unforeseen events such as accidents or natural disasters. The difficulties in obtaining these funds constitute one of the major challenges in running a business. The two major sources of business finance are internal and external funding. This paper examines the differences between internal and external sources of finance. It will also examine the advantages and disadvantages of each source. Internal sources of Finance Internal source of finance refers to funding generated within the business as opposed to financing obtained from outside sources. Internal funding can be obtained from retained earnings, sale of assets, depreciation, reduction or control of capital. Retained earnings: These are profits left over after a firm has settled its debts and paid out dividends to shareholders. The leftover funds can then be ploughed back into the business. The advantage of this method is that there is no borrowing cost associated with it. The firm has total control over the decision to use the funds and is not subjected to any vetting by lenders. The disadvantage of using retained profits as a source of funding is that the company may not have cash readily available in times of urgent need (Timimi, 2010). Sale of asset: The sale of assets is another source of internal financing. A business may choose to sell some of its assets to generate cash to finance its business needs. These assets could be in the form of patents, real estate, art work, equipment, or...
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...the amount of Trade Credit used 10. Cost of Trade Credit 11. Who bears the cost of Trade Credit? 12. What is Bank Credit? 13. Distinction between Bank Credit and Short Term credit. 14. Characteristics of Short Term financing Meaning and nature of short-term financing: Short Term financing is that from of financing which embraces borrowing or lending of funds for a short period of time. It refers to the finance obtained on short term basis, usually one year or less in duration. Short term finance is secured for financing the current assets, for example, inventories. Short term finance is also known as working capital which is the excess of current assets over current liabilities. Current liabilities become due within one year and indicate the amount of short-term credit being utilized by the business. Practically all enterprises use the short-term credit as sources of finance. We find in the balance sheets of almost all the companies some kinds of current liabilities which are the indicator of the uses of short term finance in business. It has been found in the developed countries especially in USA that even the largest business establishment makes use of short term finance. The size of business has an important bearing on the use of short term finance. There is variation in the use of short term finance between the large and small sized business establishments. In...
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...SELECTED BANK LOANS IN U.T. OF DADRA AND NAGAR HAVELI’’ Submitted to Post Graduate Department of Business Studies Sardar Patel University VallabhVidyanagar Submitted by Dipankar Prajapati Asst. Professor at SSR College of ACS, Silvassa U.T. of Dadra and Nagar Haveli. INTRODUCTION__________________________________________________ BANKING SYSTEM IN INDIA Banking is believed to have existed in the most crude form in India, as early as Vedic period. Money lending was common practice in India, with the ancient people. The Puranas and Smritis mention about money changing and money lending. Manusmriti contains reference regarding deposits, pledges, policy on loans and rates of interest. Kautiliya’s Arthashastra also speaks extensively on banking practices in ancient India. The banking system of a country occupies a pivotal role in functioning and development of a country’s economy. In fact, it lies at the core of money market and also plays a complementary role in supporting the capital market. It is necessary to remember that the structure of the banking and financial system of any country is neither created at one stroke, nor is it permanent for all times to come. The fact of the matter is that various institution get evolved over a period of time, either through the trial and error method adopted by the people or at the instance of government. The organized sector banking system in India consists of the Reserve Bank of India as the apex bank. The Reserve...
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...Term Paper on Merchant Banking and Investment Banking Operation in Bangladesh Course Name: Law and Practice of Banking Course Code: F-209 SUBMITTED TO: Ms. Tazrina Farah Assistant Professor, Department of Finance University of Dhaka SUBMITTED BY: Group no:08 , Section: B Batch: 19th Department of Finance University of Dhaka Date of submission: November 13, 2014. Group Profile: SL | Name | ID | Remarks | 01 | Mohammad Monirul Islam Monir | 19-030 | | 02 | Md. Arif Sarder | 19-036 | | 03 | Adnan Al Rahin | 19-068 | | 04 | Zahid Hossain Joy | 19-096 | | 05 | Nargis Mahmuda | 19-116 | | 06 | Aftab Hossain | 19-120 | | 07 | Imran Bhuyan | 19-144 | | 08 | Faisal Amin | 19-162 | | 09 | Chandan Kumar Roy | 19-164 | | 10 | Md. Fakhrul Islam | 19-190 | | 11 | Debopriyo Paul Utsha | 19-206 | | 12 | Noor Mohammad | 19-256 | | Letter of Transmittal November 13,2014 Ms. Tazrina Farah Assistant Professor, Department of Finance, University of Dhaka. Subject: Submission of term paper. Dear Madam, This is a report on “Merchant Banking and Investment Banking Operation in Bangladesh” for fulfilling course work of BBA program and it is our pleasure to present such before you. We have prepared this report based on the data gathered from interviewing two higher officials of IDLC Financing Limited and BRAC EPL Investment Limited(BEIL) . For the preparation of the term paper, we have focused on the information found to be reliable and valid. We truly appreciate...
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...consumer debt into mortgages guaranteed by taxpayers. * Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers. What are the relevant regulatory agencies or bodies? Describe their roles. The Office of the Superintendent of Financial Institutions (OSFI) regulates federally licensed banks, trust companies, insurance companies, credit unions and some provincial financial institutions. It was created in 1987 to supervise the financial institutions and to build consumer confidence in the Canadian financial system by reducing unjust losses. The Office of the Superintendent of Financial Institutions is an independent agency, that has to report to Parliament through the Minister of Finance. Some of their duties include: providing input for new legislation and regulations, monitoring the safety and soundness of federal institutions, approving requests from institutions under the applicable legislation...
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...CHAPTER - 1 INTRODUCTION 1.1 INTRODUCTION TO SMEs Small and Medium Enterprises (SMEs) have played a significant role world over in the economic development of various countries. Over a period of time, it has been proved that SMEs are dynamic, innovative and most importantly, the employer of first resort to millions of people in the country. The sector is a breeding ground for entrepreneurship. The importance of SME sector is well-recognized world over owing to its significant contribution in achieving various socio-economic objectives, such as employment generation, contribution to national output and exports, fostering new entrepreneurship and to provide depth to the industrial base of the economy. Small and medium-sized enterprises (SMEs) are the backbone of all economies and are a key source of economic growth, dynamism and flexibility in advanced industrialized countries, as well as in emerging and developing economies. SMEs constitute the dominant form of business organization, accounting for over 95% and up to 99% of enterprises depending on the country. They are responsible for between 60-70% net job creations in Developing countries. Small businesses are particularly important for bringing innovative products or techniques to the market. Microsoft may be a software giant today, but it started off in typical SME fashion, as a dream developed by a young student with the help of family and friends. Only when Bill Gates and his...
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...Simulation Review University of Phoenix HCS/405 Health care organizations, particularly hospitals face increasing problems managing cash flow due to changes in billing procedures and the economic climate. Research quoted in Fierce Healthcare Finance showed that hospitals are using investment cash flow, normally reserved for capital expenses, to pay for operating expenses. In a study quoted by Fierce Healthcare Finance (Ziegler, 2008) the depth of the problem becomes apparent “Between 2004 and 2007, the 170 hospitals studied by Best allocated a steadily greater portion of their invested assets to cash and short-term investments, climbing from 27 percent in 2005 to 31.1 percent in 2007.”With reduced funds available for capital expenses, it becomes difficult for hospitals to keep up with technology and to thrive. Elijah Heart Center is facing the financial dilemma common in specialized health care organizations, the combination of the need for improved technology, reduced income, and the demand for expansion. Without the needed technology and expansion, there little the hospital can do to improve income. The financial situation requires a combination of strategies to reduce costs and to make the wisest choices regarding acquiring needed technologies and expansion. Phase I: Capital Shortage The goal is to save $900,00 for the first year and to help improve the cash flow problem that Elijah Heart Center is experiencing. The hospital can select two cost cutting options...
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...WRITTEN REPORT IN FINANCE 2 Punzalan, Joyce Ann M Prof. Ian Tianero BSBA-Management SPECIAL CREDIT FROM SUPPLIERS There are some manufacturing companies that obtain assistance from their customers in the form of payments in advance for goods ordered. There are some cases that suppliers grant long terms of payments on goods that they delivered to their customers. There are privilege specially to the customers who will purchase more goods on them, it is also a competition to those manufacturing company which have the same product. Long terms of payment on goods delivered can be a device to increase the volume of sales of the manufacturing company. TRADE ACCEPTANCE “A written order for a sum of money originating with a creditor and naming a debtor, customarily forwarded to a bank for a collection” It is a time draft drawn in the seller of goods on a buyer, in a trade acceptance the buyer is the acceptor. It is a bill of exchange for the amount of a purchase drawn by the seller on the purchaser, bearing the purchaser signature and specifying time and place for payment. The promises of payment maybe for 30 to 60 90 day period. If the acceptance is made by a finance company, then it is called a trade acceptance. An example would be a finance company affiliated with a manufacturing company that must make large purchases of parts, either domestically or overseas. Since a finance company does not necessarily carry the same "comfort" weight as a bank, or in order to facilitate...
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...merchant banking was the necessity of banks themselves which were in need of non-fund based income so as to improve their profitability margins by all means in the changed economic scenario. Merchant Banking is known by different names in different places. In the USA, it is known as “Investment Banking”. In the UK it is known as “accepting and clearing houses”. Definitions of Merchant Banking 1) A Merchant Bank is a bank or financial institution that handles all the tasks related to incorporation of a company as well as marketing corporate and other securities. 2) Merchant Banking is an institution engaged in the business of issue management either by making arrangement regarding selling, buying or subscribing to securities or acting as manager, consultant, advisors or rending corporate advisory services in relation to issue management. 3) As per SEBI, Merchant Bank mostly provide advisory services, issue management, portfolio management and underwriting services, which require less capital but generate more income (non-interest income). 4) As per the Ministry of Finance; any person who is engaged in the business of issue management either by making arrangement regarding selling, buying or subscribing to the securities as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management. Classification of Merchant Banks: (1) Public Sector Merchant Banks: • Commercial Banks (public) • National Financial Institutions ...
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...(McLaney and Atrill: 2010) suggest that finance is concerned with the way in which funds for a business are raised and invested. Any business irrespective of its size and nature requires sources to raise finance. Different types of sources of finance are available to different types of businesses. Broadly the two types of sources of finance are internal and external. Internal sources are from within the business and external sources are outsourced extrinsically. The three main legal statuses of business constitute of being a sole trader or partnerships and Private Limited Company. Sources of finance available to each of these are discussed below. Sole Trader and Partnership: Sole traders and partnerships refer to the simplest forms of business organization. A sole trader is an individual who runs a business from his own name, providing all the capital and assuming all the risks. A partnership can include more than one individual. Sole trader and partnerships have a range of options to get finance. Personal Savings and Loans * Put simply, personal savings is the amount of money a person has at his disposal. It becomes a source of finance when the sole trader or a partnership member is willing to invest it in his business. It is up for the individual to decide whether he wants to keep his savings or use them to buy equipment, vehicles, tools or other things his business's needs. Loans from friends and family also amount to a source of finance. Working Capital * Working...
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... | |Assessment Code |HND Bus-Unit 2/Managing Finance May 2013 | |Hand Out Date |27th May 2013 |Hand In Date |26th July 2013 | |Lecturer(s) |Mr. Haider |Internal Verifier | | | |Mr. David Ogila | | | | |Mr. Daniel R. | | | |Sources of information |Course Notes / Slides / Activities / Handouts. | | |Recommended Learning Textbooks: | | |BPP Business Essentials Managing Finance | |...
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...What is the difference between public and private finance? Government expenditures are the expenditures incurred by the Government for development of the country and also on non-development objectives in view. Government revenue comes from taxation i.e. direct taxation and indirect taxation. Government ‘debt is obtained from internal and external sources. Loans from internal sources are obtained by selling Government securities to the people whereas external sources are those such as the World Bank, IMF etc. Public finance is for the benefit of the people in general unlike private financing which is confined to a particular purpose i.e. family matter only. We shall now take up the difference between the two. The basic difference between public and private financing is that an individual adjusts his expenditure in accordance with the given income. On the other hand, the Government relatively speaking adjusts its income in accordance with its expenditure. Thus, the individual is only able to spend so much but the government may spend as much as it likes and then care of the income. Relatively speaking the Government prepares its expenditure first or rather it estimates expenditure, and only then devises ways and means to obtain the amount required. However, sometimes the individual also does the same thing as the Government and vice versa. i.e. when the Government realizes a surplus budget it would increase expenditure in specific areas and when the public revenue is declining...
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...STATUTORY & OTHER RESTRICTIONS ON LOANS & ADVANCES Advances against bank's own shares: A bank cannot grant any loans and advances on the security of its own shares.( Section 20(1) of the Banking Regulation Act, 1949) Advances to bank's Directors : Banks are prohibited from entering into any commitment for granting any loans or advances to or on behalf of any of its directors, or any company/firm in which any of its directors is interested as partner, manager, employee or guarantor (B.R Act (Section 20(1). ‘Loans & advances’ include, among others:- • Purchase of or discount of bills from directors and their concerns. • Issuance of guarantees and opening of L/Cs on behalf of the bank’s directors. Restrictions on Power to Remit Debts A banking company shall not, except with the prior approval of the Reserve Bank, remit in whole or in part any debt due to it by any of its directors or any firm or company in which the directors are having interest or partner or guarantor. (Sec. 20A of BR Act) Restrictions on Holding Shares in Companies Banks should not hold shares in any company except as provided in sub-section whether as pledgee, mortgagee or absolute owner, of an amount exceeding 30 percent of the paid-up share capital of that company or 30 percent of its own paid-up share capital and reserves, whichever is less. (Section 19(2) of the Act) The banks should not hold shares whether as pledge , mortgagee or absolute owner, in any company in the management...
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...Sources of Finance Loan from Family/Friends: Borrow money from another family member or friend, where length of loan, interest rate on loan and any other terms of the loan must be negotiated between parties. Advantages of a loan from family/friends is lower interest rates and more flexible repayment terms. Disadvantages of a loan from family/friends is lack of clarity with amount borrowed (the interest rate and the required payment terms) and also borrowing from friends and family can fracture relationships on a personal level Suitability Good Long or Short term finance option as terms of loan are decided between parties Interest rates are decided by parties Could be suitable source for Douglas Pty Ltd if family or friends have suitable amount of money for business and terms can be decided without affecting relationship. Bank Overdraft: Loan made by a bank in which the customer can withdraw more money from his or her bank account than has been deposited in the account. Advantages of bank overdraft is that it is a quick and flexible source of finance. They are easy and quick to arrange, with little fuss and It allows you to make essential payments when you need to borrow money. Disadvantages of bank overdraft are the costs as overdrafts carry interest (often at much higher than loans), Recall, the bank can recall the entire overdraft at any time. Security for overdrafts may need to be secured against your business assets, which put them at risk if you cannot meet repayments...
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................................... day of .................., 200 , Between the Bank/FI (precise name to be inserted here) established under the ................ Order/Act, (P.O./Act No. of .........................)/registered under the Companies Act, 1994 (Act No 18 of 1994) / the Companies Act, 1913 (VII of 1913), hereinafter referred to as the Bank/FI (which expression shall unless excluded by or contrary or repugnant to the context be deemed to include its successor or successors and assigns), having its Head Office at Dhaka/Rajshahi, on the One Part, And M/s..................................... Ltd., a private limited company, registered under the Companies Act, 1994 (Act No............of 1994), hereinafter referred to as the Company (which expression shall unless excluded by or contrary or repugnant to the context be deemed to include its successor or successors and assigns), having its Head/registered office at Dhaka / ........ ... ........, on the Other Part. Whereas A. Pursuant to the Co-operation Agreement of ................., 200 , entered into between the Bangladesh Bank [hereinafter referred to as “Bangladesh Bank (EEF Unit)”] and the Bank/DFI/FI and pursuant to the EEF circulars issued from time to time for administration of the Equity and Entrepreneurship Fund (hereinafter referred to as “the EEF”), the Bank/DFI/FI has agreed to extend equity-support, on behalf of the Bangladesh Bank (EEF Unit), to the eligible private limited companies; B. The Company has drawn...
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