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SOURCES OF FINANCESOURCES OF FINANCE
SHORT TERM LONG TERMTRADE CREDITSCREDIT FROM SUPPLIERSADVANCE FROM DEALERS
PURCHASE OF FIXED ASSETSFUNDING EXPANSIONSDIVERSIFICATIONS
LOGO
OWNED FUNDSOWNED FUNDS BORROWED FUNDSBORROWED FUNDS
SHARESSHARES RETAINED EARNING
LONG TERM FINANCE
SHARESSHARES• A SHARE HAS BEEN DEFINED BY THE VIETNAM’S BUSINESS LAW
• SHARE MEANS SHARE IN THE SHARE CAPITAL OF THE COMPANY & INCLUDES STOCK EXCEPT WHERE A DISTINCTION BETWEEN STOCK & SHARE IS EXPRESSED OR IMPLIED.
• THE LIABILITY OF THE SHAREHOLDER IS LIMITED TO THE EXTENT OF THE FACE VALUE OF THE SHARES.
A SHAREHOLDER- MEMBER OF THE COMPANY
PRIVATE COMPANYPRIVATE COMPANY PUBLIC COMPANYPUBLIC COMPANY
MINIMUMMINIMUM
MAXIMUMMAXIMUM
22
5050
77
UNLIMITEDUNLIMITED
NUMBERS OF MEMBERS (MEMBERSHIP ) IN CASE OF A COMPANYNUMBERS OF MEMBERS (MEMBERSHIP ) IN CASE OF A COMPANY
AUTHORISED CAPITAL
ISSUED CAPITAL UNISSUED CAPITAL
SUBSCRIBED CAPITAL UNSUBSCRIBED CAPITAL
CALLED UP CAPITAL UNCALLED CAPITAL RESERVE CAPITAL
PAID UP CAPITAL CALLS IN ARREARS (UNPAID CAPITAL)
EQUITY SHARES
•RISK BEARING CAPITAL
•NO FIXED RATE OF DIVIDEND
•RIGHT TO VOTE
•OWNERS OF THE COMPANY
RIGHTS OF EQUITY SHAREHOLDERS•THE RIGHT TO RESIDUAL INCOME
•RIGHT OF CONTROL
•PRE-EMPTIVE RIGHT
•RESIDUAL CLAIMANTS OVER ASSETS
ADVANTAGES OF EQUITY SHARES
TO THE ISSUING COMPANY-
•PERMANENT SOURCE OF CAPITAL
•NO FIX DIVIDEND
•CREDITWORTHYNESS OF THE COMPANY
DISADVANTAGES OF THE EQUITY SHARES
TO THE ISSUING COMPANY-
•NOT A TAX-DEDUCTIBLE EXPENSE
•FLOATATION COST IS HIGHER
•OVER CAPITALISATION
•DILUTION OF CONTROL
ADVANTAGES OF EQUITY SHARES
TO THE SHAREHOLERS-
•HIGHLY PROFITABLE SHRES
•OWNERS OF THE COMPANY
•LIMITED LIABILITY
DISADVANTAGES OF EQUITY SHARES
TO THE SHAREHOLERS-
•RISK CAPITAL
•CONTROL OVER THE MANAGEMENT
•FLUCTUATION
PREFERENCE SHARES•PREFERENCE SHARES ARE THOSE SHARES WHICH ENJOY PRIORITIES IN THE PAYMENT OF DIVIDEND AS WELL AS IN THE REPAYMENT OF THE CAPITAL
•PREFERENCE SHAREHOLDERS ARE ENTITLED TO RECEIVE A FIXED RATE OF DIVIDEND BEFORE THE DIVIDEND IS PAID TO THE EQUITY SHARESHOLDERS.
TYPES OF PERFERENCE SHARES
1.PARTICIPATING AND NON PARTICIPATING SHARES
2.REDEEMABLE AND IRREDEEMABLE SHARES
3.CUMULATIVE AND NON CUMULATIVE SHARES
4.CONVERTIBLE AND NON CONVERTIBLE SHARES
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
ADVANTAGES OF OWNED FUNDS•INDICATES THE OWNERS STAKE AND INTEREST•CUSHION FOR RAISING BORROWED FUNDS•PROPOTION•NO OBLIGATION•SAFETY TO THE LENDERS•RIGHT TO ACTIVE PARTICIPATION
RETAINED EARNINGSINSTEAD OF DISRTIBUTING THE ENTIRE PROFITS TO THE SHAREHOLERS, COMPANY RETAINS SOME PROFITS FOR THE PURPOSE OF-
1.ACCUMULATIONS OF EARNINGS2.INVESTMENT IN FIXED ASSETS3.TO MEET WORKING CAPITAL NEEDS
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 TERM LOANS
•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 DECISIONS
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
DEMERITS OF PLOGHING BACK OF PROFITS-
•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 EMPLOYEES•CONCENTRATION OF ECONOMIC POWER IN FEW HANDS
DETERMINANTS OF INTERNAL FINANCING
•TOTAL EARNING OF THE ENTERPRISE•TAXATION POLICY OF THE GOVERNMENT•DIVIDEND POLICY•GOVERNMENT ATITUDES AND CONTROL•OTHER FACTORS
MERITS OF INTERNAL FINANCING
ADVANTAGES RO THE COMPANY-
•BEST AND CHEAPEST SOURCE OF FINANCE•STABLE DIVIDEND POLICY•INCREASE IN MORALE OF MANAGEMENT•SAFETY FROM TRADE CYCLES
ADVANTAGES TO THE SHAREHOLDER•INCRAESE IN THE VALUE OF THE SHARE•INCREASE IN EQUITY•INCREASE IN THE COLLATERAL VALUE OF SHARES
ADVANTAGES TO THE SOCIETY•CAPITAL FORMATION•INCRAESE IN SOCIAL WELFARE
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