finance-banking-eng.docx

7/26/2019 finance-banking-eng.docx

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Classes 9-10


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Prescribed by the National Curriculum and Textbook Board

as a Textbook for class Nine -Ten from the academic year2013

Finance and Banking

Class Nine-Ten

Written by

hibli !ubayat-"l-#slam

$ohammad alahuddin

Cho%dhuryNa&mun Nahar

Edited by

'r( $ohammed $asud !ahman

Translated by

)ahid Bin $atin

$unshi )alal"ddin

Takad *hmed Cho%dhury

Na&mun Nahar

NATIONAL CURRICULUM AND TETBOO! BOARD


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"#blis$ed by

Nati%nal C#rric#l#& and Te'tb%%k B%ard+9(,0 $oti.heel Commercial *rea 'haka

/*ll rihts resered by the ublisher

Trial Editi%n4irst ublication 5 'ecember 2012

C%-%rdinat%r*( 6( $( $ainul 7ossain

C%&(#ter C%&(%seColor 8rahic

C%)erudarshan

Bacharu.aul*bedeen

DesignNational Curriculum and Textbook Board

4or free distribution from academic year 2010 by the 8oernment of Banladesh

Printed by 5


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"re*ace

ducation is the re-re:uisite for the holistic deeloment in our national life( To coe %ith the

challenes of the fast chanin %orld and to lead Banladesh to the doorste of deeloment

and roserity a %ell educated and skilled oulation is needed( #n order to build u a nation

imbued %ith the sirit of the ;anuae $oement and our ;iberation s ae merit and leel of ac:uisition( Besides efforts hae

been made to raise startin from the leel of moral and humanistic alues do%n to a%areness on

history and tradition the sirit of the ;iberation


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CONTENT,

C$a(ter eading %* t$e C$a(ter "ages

@ne 4inance and Business 4inance 1-13

T%o ources of 4inance 1A-2+

Three Time alue of $oney 2,-A1

4our !isk and "ncertainty A2-0

4ie Caital Budetin 1-+3

ix Cost of Caital +A-,2

een hare Bond and 'ebenture ,3-D3

iht Currency Bank ? Bankin DA-D9

Nine Bankin Business and Tyes 90-101

Ten *n #ntroduction to Commercial Banks 102-109

leen Bank 'eosit 110-119

T%ele Bank and Client 120-12

Thirteen Central Bank 12+-13+


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C$a(ter T.el)e

Bank and Client

tudents %ill learn from this chater about different serices roided by the bank to itsclients( Beside this they also can ain kno%lede about the Bank>s resonsibilities

to%ards the clients and client>s resonsibilities to%ards the Bank( *lso students %ill be

able to reali&e the imortance of account secrecy(

A*ter learning t$is c$a(ter .ill be able t%/

E =no% the Nature of Bank- Client relationshi and their resonsibilitiesto%ards each(

E The Bank>s *ccount ecrecy(


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Bank and Client 121

01+ Intr%d#cti%n

$ain ideoloy of bank is the relationshi and belief bet%een the Bank and Client( #f

any ste of each arty is aainst this belief and trust then relationshi bet%een them %ill

be disruted %hich %ill cause the business to be dissoled(

01+0 Nat#re %* Bank-ClientRelati%n/

Person institution comany inoles in bankin business is called FBankerG( uch a%ay client means that erson %ho is inoled %ith the bank throuh his account or anyof the serice of the bank( @n the basis of the functions and serices roided by the

bank to its clients Bank H Client relationshi can be considered as5

0+ Debt%r 2Credit%r Relati%ns$i(/ s money( But it isaid on thefulfillment of some condition secified by the contract( *s an examle5 #fmoney is deosited inthe current or sains account then client can %ithdra% money by %ritin the Che:ue and anyaroal of the bank is not needed(

1+ ,ecrecy %* acc%#nt/ Bank neer discloses any information of the clients excetasked or

adised by the Court Banladesh Bank or resectie client(

3+ Carrying %n de(%sit%r4s %rder5 *ccordin to the order of the deositor bank utili&es thedeosited money( *s an examle if client orders bank to reay the dues to some


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;+ Balance Trans*er/ #f client orders on bank to transfer all his account balance to the other

bank then client>s account automatically closes do%n(

#esti%ns/

1(


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Read t$e *%ll%.ing (assage and ans.er t$e 7#esti%n n%+

5*fter runnin her business for lon term $iss( adia closes do%n all her bankin

transaction %ith the intention of oin abroad(

A( 7o% did the relationshi bet%een adia and bank come to an endI

a( 'ue to the declaration by the court

b( Because of the decision of the bank

c( 'ue to lon term discontinuation of transaction

d( 'ue to client>s decision(

Creati)e

>#esti%n/

en thouh tryin for a lon time *bed couldn>t conince his friend oenin an

account in a bank he al%ays refers to kee his money in $unicial Cororation due to

certain rocedure and interest rate( But some ao he had %ithdra%n certain amount of

money from the bank that he needed urently to urchase different oods and

decoration items( But !ahim failed to %ithdra% the money in time thouh he submittedthe alication and re:uested to the treasurer of Phulur Co-oeratie reeatedly(

a(


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C$a(ter One

Finance and B#siness Finance


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2 4inance and Bankin

0+0 C%nce(t %* Finance

4inance deals %ith fund manaement( 4inance reares lans and imlementsnecessary actiities about %hat amount of fund should be collected from %hich sourcesand %here ? ho% this fund is to be inested for hihest rofit in the ro.ect( #n case of a

business firm fund flo%s in the business from sellin of roducts( 'ifferent tyes offund are needed to roduce and buy oods for the business like- urchasin machinery

urchasin ra% materials ayin %aes to the labours etc( These are the utili&ation offund( 4unds need to be collected in a lanned %ay as er the re:uirement of fund tomaintain an uninterruted roduction rocess( 4inance means this rocess related tofund collection and utili&ation(

9r%#( Acti)ity/ tudents %ill resent the fiures of reular exenditures and heads

of lare exenditures of their family and %rite do%n the features of family finance(

#f you isit a tailorin sho in your locality you %ill see there one or t%o erson se%in%ith a machine( *ain someone may be cuttin clothes or stitchin the buttons( o tocontinue the tailorin business roerly the sho o%ner has to urchase machinesthreads buttons scissors etc( of necessary amount( *t the beinnin of his business he

bears these exenses from his o%n sain( #f the fund aears insufficient then he maytake loan from his relaties to oercome the shortae( %aes house rent electricity bill etc( and he ays all these %ith the moneyearned by se%in cloths( 7e also has to lan to ay back the loan money from thismonthly collection( *n o%ner of a tailorin sho al%ays exects that he can earn someamount of rofit een after meetin all necessary exenditures from the income of the

business by %hich he can sae for the future or can utili&e for business exansion eenafter meetin reular exenses of his family( o if an o%ner of a tailorin sho conducts

business throuh a roer lannin reardin the source of finance and its utili&ationonly then he can earn rofit throuh smooth oeration of the business( @ther%ise it %ill

be found that due to cash crises se%in thread cannot be bouht timely and thecustomers are returnin( *ain it may be needed to shut do%n the business due to lackof money to buy a ne% machine relacin the old one( To conduct the business

roerly Business f inance deals %ith %hen and for %hat reason ho% much amount offund is needed and from %hich sources this fund should be collected for smoothoeration of the business(

There has imlication of finance in family too( 8enerally eery family has one or morethan one sources of finance( #ncome may be obtained from different sources in differentfamilies such as from serice business aricultural actiities self-emloyment etc(Beside these reular exenditure of a family occurs for daily shoin costs houserent school fees different bills ayment etc( *s exenditure should be matched %ithincome in this %ay riht time of exenditure should also be maintained( #f money isinsufficient as er demand then as an examle it may haen that name of the studentmay be cut do%n from the reister( #n case of a family re-lanned identification of the

sources of finance and its utili&ation is the financial rocess( @ther than dailyexenditure of this tye sometimes occasional exenditure may be re:uired in thefamily %hich may exceed the income ability of a erson( #f it is not ossible to collectmoney from reular income sources for such exenditures like buyin a ne% teleisionor refrierator then the shortae may be fulfilled throuh lon term loan( #n that case aloan reayment lan needs to be reared( *s a result the concet of finance hels to


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determine the sources of fund and make roer manaement of it to conduct the familysmoothly(

9r%#( Acti)ity/ tudents bein diided into seeral rous %ith the hel of theteacher %ill identify the current exenses and fixed exenses of the businessorani&ation( They %ill also make a list of comarison bet%een the features of these

t%o exenses(4inancial rocess can be understood from the ersectie of a school also( chool is a

social orani&ation %hose main ob.ectie is not rofit earnin there also has a lan ofincome- exenditure and fund manaement( ducational institutions enerally collectsfund from sources of their students> tuition fees examination fees admission fees etc(The institution has to meet different exenditures %ith this fund to run the academic

actiities roerly like- ayment of teacher-staff>s salary house rent electricity billdifferent tyes of renoation exenses urchasin comuter and furniture( o ensurinfund manaement for erformin arious %orkin rocess of the institution nicely byconsiderin different sources of fund and different sectors of utili&ation is financin inthe ersectie of the school(

*mon aboe examles tailorin sho is a rofit makin orani&ation but family andschool are non-rofit orani&ations( @ur resent toic is inoled mainly in financin of

rofit-makin- or business orani&ations( 7o% is the financial rocess of a roceryshoI The sho o%ner earns rofit by sellin roducts( But for the urose of sellinhe needs to comlete on reular basis urchasin roducts ayin rent electricity bill%aes of the %orkers etc( as current exenditures( $oreoer sometimes he has tosend a lare amount of money for uroses like- exansion of business for the need ofthe customers urchasin a refrierator etc( These are his fixed exenditure( Thus arocer re:uires to inest both in fixed assets and current assets( #f income from sellinis not sufficient for collectin fund for inestment he has to collect fund from othersources like ersonal fund friends-relaties urchase on credit etc( *ain he maycollect lare amount of money %hich he needs to inest in fixed assets usually fromcommercial banks( #n such financin as there is the oortunity of reayin in lonschedule of time the risk of loan reayment is reduced a bit( #n the case of a rocerysho main actiities of business finance are fund manaement throuh roerutili&ation of money receied from sales roceeds in meetin current exendituressome lon term inestments collection of money from less risky sources timelyreayment of loan installments etc(

:uare Pharmaceuticals Bata Comany =ohinoor Chemicals H these are lare si&ebusiness orani&ations %hich are called comany( 4inancial rocess of such a comanyis not so simle like rocery sho or tailorin sho rather it is comaratiely comlex(#n fund collection a lare comany ets more benefit than a small orani&ation( 4or

examle a comany collects caital by sellin shares in the share market( Comany>sood%ill rate of rofit customer serices or consumers> satisfaction hels to increasethe share rice in share market( Business finance deals %ith and roides uidancereardin5 from amon different sources usin %hich source %hen and ho% much fundshould be collected and in %hich sectors ho% much amount and ho% %ill it be inested

to increase the rofit(


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cJ Internati%nal Finance

Pic5 Banabandhu Bride

#n international finance exort and imort sectors are discussed and analy&ed(Banladesh is mainly an imort-oriented country( ery year hue amount of foodstuff

ra% materials machineries medicine etroleum etc( are imorted from differentcountries( @n the other hand .ute and .ute roducts readymade arments aricultural

roducts etc( are bein exorted( Trade deficiency of lare amount occurs as the olumeof imort is reater than the olume of exort( !emittance sent by the forein d%ellers

lay ital role to comensate this deficiency( #nternational finance coers discussion

about exort and imort sectors and the %ay of manaement to comensate the tradedeficiency(

Indi)id#al Acti)ity/ The teacher %ill arrane an oen discussion class on the toicFtes necessary to raise forein currency resereG and ie a home%ork on it for thenext class(

dJ Finance %* N%n-"r%*it Organi?ati%n

#n our society there are some institutions or orani&ations %hich are inoled in the%elfare of mankind or roidin serices for the oor and distressed eole( To runthis tye of business money or roducts or serices similar to money is re:uired and it

is necessary to utili&e that money efficiently( #n this connection the role that the financelays is identification of the sources of finance or %ealth similar to money and ensurinits roer utili&ation for the urose of achiein the serice-oriented ob.ecties( *s anexamle it could be mentioned5 an orhanae is not a rofit makin institution but italso has need of finance( These tyes of institutions collect money throuh different

rants( This collected money is sent in arious deeloment actiities for the orhans(o source identification and roer utili&ation of fund to achiee its motto is the mainob.ectie of finance of non-rofit orani&ation(

eJ B#siness Finance

The most imortant tye of finance is business finance( *n orani&ation formed %iththe urose of earnin rofit throuh the risk rofit and loss is called a businessorani&ation( o business finance is the rocess used to collect fund and inest it for

business uroses( Business orani&ations are classified into three tyes5


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ole Prorietorshi Business Partnershi Business and )oint Caital Businessorani&ations( 8eneral feature of these three tyes of orani&ations are fund collection

and fund manaement( 4or fund collection o%n caital and loan are used as sources(Business finance is the main theme of this lesson(

The most famous business orani&ations in Banladesh are usually formed as solerorietorshi business and artnershi business( arieties small and cottae industries

hotel ? restaurant business rocery sho saloon bouti:ue sho etc( are of these kindsof business( #n sole rorietorshi business if rofit if earned the o%ner en.oys it aloneand if any loss occurs the o%ner>s ersonal roerties also be used reair the loss(

#n artnershi business the risk is distributed amon all artners so the artners are tobe reared use ersonal roerties to bear the loss in business Kif anyJ( #n these tyesof businesses H sole rorietorshi or artnershi H sources of finance are o%ner>s o%ncaital rofit loan from relaties loan arraned on interest from bank or illae moneylenders( o earnin rofit from inestin o%n fund by roer utili&ation of money isthe main ob.ectie of these tyes of business orani&ations(

The financial rocess of a .oint stock comany is different( 8oernment aroal isre:uired to form such a comany( Before iin aroal the oernment ealuates and

analyses the minimum amount of caital directors> identity business ob.ecties andarious documents( *fter ettin aroal a comany diides its exected bi amount oftotal caital into small ortions of e:ual amount and sells these as shares in thesharemarket( 4or examle 1 lac shares of 1000 taka may be sold to the ublic

%hen thebusiness has a caital of 100 million taka( *s each share costs only 1000

taka small inestors of remote laces of the country also can urchase shares(hareholders are the o%ners of the comany and if the comany is rofitable theyusually et diidend on areular basis( hareholders can conert their shares into cash

by sellin those in the sharemarket like 'haka tock xchane( @ther than shares a

.oint stock business can raisefund by takin loans from the ublic throuh sellin bondsand debentures to them( #n thatcase the comany has to ay interest on reular basis atsome certain rate to the debenture holders( Because they are not the o%ners of thecomany like the shareholders(

9r%#( Acti)ity/ Throuh learnin the examles of this text book students %ill rearea list of comarison amon the financial rocess of non-rofit orani&ations businessorani&ations and oernment orani&ations(

fJ Bank and Financial Instit#ti%n

#n any country economic actiities usually reole centerin the banks and financialinstitutions( onali Bank )anata Bank !uali Bank Prime Bank hah.alal #slami Bank

H this tye of oernment and riately o%ned banks are rofit-oriented orani&ationsbut their financial rocess is usually slihtly different from business orani&ations(These banks collect small amounts of fund of the eole create deosit for differentterms %ith this fund and roides fixed rate of interest to the deositors( *ain banks

roide loans to the entrereneurs in different businesses from this fund( ;oans can alsobe taken for ersonal uroses( Banks imose interest on certain rate aainst theseloans( But the rate at %hich a bank receies interest on ranted loan is reater than therate of interest the bank ays to the deositors( This difference of these t%o rates ofinterest is the rofit of banks( #n bankin chater %e %ill learn in details about these


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institutions( Beside commercial banks some financial orani&ations also lay animortant role in country>s economic actiities( #n Banladesh context some examlesof these tyes of orani&ations are #nestment Cororation of Banladesh K#CBJBanladesh 7ouse Buildin 4inance Cororation Banladesh *ricultural Bank etc(These financial institutions lay their o%n secial roles in the deeloment of differentsectors of the economy of Banladesh(

1(3 I&(%rtance %* B#siness Finance#n the resent cometitie oen market economy eery oernment non-oernmentand international business institution has to finance %ith reat imortance in a re-

lanned %ay( Throuh the use of a %ell-thouht and effectie financial manaementthe risks of the institutions are reduced and rofits are increased( The follo%in thinsmake financial manaement more meaninful5

aJ Ca(ital Crisis %* B#siness

4inance related ideas bear secial imortance in a situation of Banladesh( *sBanladesh is a oor country financial crisis is a reular incident for the businessorani&ations( 'ue to this crisis to run business smoothly has become ery challenin(#t could be said as an examle a business orani&ation needs to urchase ra%materials but if it cannot urchase ra% materials timely due to the financial crisis thenthe roduction rocess of the orani&ation may be hamered( 4inance related ideas hela business entrereneur to collect necessary amount of fund at the riht time and utili&eit roerly in a lanned %ay(

bJ Back.ard Banking ,yste&

Besides as our financial orani&ations are not %ell-orani&ed like that of the adancecountries KusuallyJ loan cannot be arraned %ithin exected time after alication(ometimes loan cannot be arraned as er re:uired amount due to insufficiency of

roerty as to be leded as security for sanctionin the loan( o to oercome thisroblem business eole hae to collect fund at riht time in a ery %ell-lanned %ayand also need rofitable utili&ation of the fund %ith a riht inestment decision( Proerfinancial lan and manaement hel him to redict this tye of roblem and ie ideaabout the rocess of oercomin such situation(

cJ Less Ed#cated Entre(rene#r

The ma.ority of the entrereneurs in Banladesh is less educated and is not able toconduct financial actiities throuh a lon term lan( o many rofitable businessorani&ations cannot oerate smoothly due to the financial crisis arisen from imroerfinancial lannin and at the end it faces loss instead of rofit( But the only reason ofthis loss is financial ill-manaement( #f a businessman has sufficient kno%lede aboutfinancial manaement he can easily collect necessary amount of fund at riht time froma less exensie source and can earn enouh rofit by runnin his business throuhinestin it in a suitable ro.ect(

dJ "r%d#cti%n-Oriented In)est&ent and Nati%nal Inc%&e* successful inestment lays a direct role to increase national income( By alyinfinancial kno%lede a business erson can choose the most rofitable ro.ect fromamon the alternaties by doin a cost-benefit analysis of the ro.ects underconsideration( This tye of rofitable inestment is as much meaninful for the businessso much it is imortant also for the economic deeloment of the %hole country(


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4inance and Business 4inance 10

E'(endit#re %r In)est&ent

Decisi%n

$achine urchasin decision is an inestment decision for a tailorin sho( #n the caseof a rocery sho decision for furniture urchasin or refrierator urchasin is also an

inestment decision( 4or a roduction orani&ation roduction machines urchase or

factory construction is also this tye of decision( Throuh this decision a lan ofexected inflo% and outflo% of fund has to be calculated( 4or examle a roductionorani&ation decides to buy machines only %hen the sellin of the machine-made

roducts is reater than before and if thus rofitability and inflo% of fund are increased

and if the total inflo% of fund is reater than the urchase rice of the machine(

That means if it seems that the machines can be utili&ed for the 10 years then for theurose of inestment decision comarison has to be made %ith the 10 years inflo% offund from sale roceeds for addin the ne% machines and the urchase rice of thesemachines( o it is ossible to find out the 10 years cash flo% from sellin only byconsiderin the roduct rice in 10 years and the olume of sales( Production and other

exenses are deducted from the sales earnins to measure the rofit from the cash flo%(

The inestment decision is ery touh for an orani&ation because to measure theamount of sellin in future and determinin sellin rice is a ery difficult task(

Ot$er

Decisi%ns*boe t%o decisions are ery imortant for the financial manaers( Besides financialmanaers hae to take some other more decisions such as5

aJ Purchase of ho% much amount of ra% materials is suitable and from %hichsources this fundcan be collected H this tye of decision is called currentinestment decision(

bJ 7o% much amount of cash resere should be ket for daily exenses is another imortantdecision too(

cJ 'ues ayment for the sources of fund is another decision(

#f fund is collected throuh bank loan and other loans like- bond debenture etc( thenayment of certain amount of interest at the riht time is an imortant resonsibility forthe financial manaer( #n the same %ay if fund is collected throuh sellin of sharesthen earnin rofit at the exected rate and distributin diidend is another imortantthin to be considered by the financial manaer(

O(en Disc#ssi%n/ 4inance and inestment H %hich is the most imortant decision ofthe t%oI

0+: E)%l#ti%n %* Finance

*fter the #ndustrial !eolution of 1,th century roduction techni:ue becomes morecomlex and the roduction rocess attains its excellence throuh seciali&ed and diided

rocesses( To sustain in the market cometition finance related concet and its use

become essential(


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deeloment of the classical trend of micro economics finance %as also inoled in the

o%n and seciali&ed economics of the business at the end of 19th century( The trends ofthis financial eolution ie us the meaninful idea about the nature and scoe of finance(Traditionally financial manaers> main resonsibility %as accounts maintenance andmakin a future lan of action by analy&in it( Besides reort rearation to reflect actual

condition of the business and li:uid fund manaement to build business caacity ofayment of the dues in riht time these are also added %ith the eolutionary rocess offinance( But %ith the ex ansio n of ciili&ation the scoe and technoloical deelomenthae chaned the resonsibilities of financial manaers( The eolution of financethathaened in the last century in "* the main exercisin field of finance is later

kno%nas the trend of olution of 4inance throuhout the %hole %orld( *ccordin tothat thestaes of financial eolution can be resent in the follo%in %ay5

a@ "re-0=3 Decade/ This time a trend of unification bean amon the comanies of the "*(4inancial manaers had to identify a frame%ork about %hich comany shouldbe unified %ith%hich one by examinin the financial statements of the comanies( They took theresonsibility of hue amount financin and of rearin financialstatements for this unification(

9r%#( "resentati%n/ $ake a comaratie analysis bet%een the rocess of actiities of

manaers of the day and that of reious manaers(

b@ 0=34s/ Tendency of unification did not et success in "*( $any of the comanies unified in

the ast decade turned into bankrut in the next decade( $oreoer hih deression started in"*( $any rofitable comanies also fell in a reat loss( *t that situation ho% these loosin

comanies can be reorani&ed to rotect them from thebankrutcy %as a secial resonsibilityof the financial manaers( 4rom that time fundcollection throuh share sellin %as started(

c@ 0=54s/ Necessity of li:uidity %as the main concentration at this time( 4inance did thatresonsibility by ensurin %ell-lanned cash flo% %ith makin a budet of cash flo%(

e@ 0=6s/ #n this decade finance %as inoled in ealuatin the most suitableinestment ro.ectby usin different mathematical analyses( $ain actiity of finance then turned to rofitmaximi&ation by increasin sales and decreasin exenditures throuh suitable lon terminestments based on lon actin forecastin( This trend isconsidered as the traditional trend of

finance(

*@ 0=:4s/ $odern finance started its .ourney from this time( 4inance started iinriority incaital market( hareholders are the o%ners of a comany so maximi&ation of the shareholders>

roerty or the market rice of shares became the main ob.ectie of finance of this time( Toachiee this ob.ectie different actiities relatin to financialanalysis %ere started( Concet ofrisk in finance makes us understand that risk increases %ith the increase of rofit( o rofit

makin may not be desirable all the time(

g@ 0=;4s/ ra of comuteri&ed actiities started in this decade( This not only chaned theroductiontechni:ues but also brouht chanes in business finance( 4inance is no%$athematics-based(

$ost of the financial decisions are mainly based on comlexmathematical calculations and thetendency of makin these calculations ery effectiely


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3( #n oen market manaement ho% does a business firm hae to finance %ith reatimortanceI

Creati)e >#esti%ns/

1(

8reen Bank 1 #nterest!ate ;oan of D00000

taka 4or years(Payment of lectricity

Bill 100000 taka

4riend hafi:ul #slam

100000 taka

$anaer of *(=(nterrise $r( ohan 10

lac taka

Payment of


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,%#rces %* Finance

Internal ,%#rces E'ternal ,%#rces

"r%*it-%riented

Internal

,%#rc e s

E "ndistributed

Profit and

ains 4und

E 'iidend

:uitable 4und

O.ners$i(-based I n ter n al

,%#rc e s

E @%ner>scaital

E hare

,$% r t Ter&Instit#ti%nal

E 'iscountin

of

*ccounts

Payable

E *cc

oun

ts

!ec

eia

ble

E hort Term

Bank;oan

E mall Credit

N%n-Instit#ti%nal

E CommercialPaer

E Buyer>s*dance

E $ortain

tored8oods

E $oneylenders

Mid Ter&E Commerci

alBank

;oan

E eci

ali&ed

4inan

cial

ourc

es

ENon-

8oernmen

t#nstitution

E Caital

$arket

#nstitution

s

E #nternation

al4und

L%ngTer&

E ;oan

E

'ebentures

E ;easin

Picture 2(15 Classification of the sources of finance

2(2(1 O.ners$i( Based Classi*icati%ns %* Internal ,%#rces

Nature of internal fund is different for different kinds of business orani&ations( s o%n sains or it may be any kind of factors of roduction measurable inmoney such as5 land labor caital and orani&ation %hich are used in roduction( #f

the orani&ation is a artnershi business fund inested by the artners is considered asthe o%ner>s caital( @n the contrary if the orani&ation is a comany fund collectedthrouh shares sellin is considered as internal source of finance( )oint stock comaniesare of t%o tyes5 Public ;td( Comany and Priate ;td( Comany( Number of #nitiatorsin riate ltd( comany is 2 to 0 and in ublic ltd( comany it is minimum , and the

maximum number may be any number limited to the shares( Both ublic and riate ltd(comanies collect caital throuh share sellin( But a riate ltd( comany sells sharesamon the secified o%ners instead of sellin them in the share market( *n imortantsource of caital collection for a ublic ltd( comany is share sellin(


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arious %ays as a source of fund H these are discussed belo%( *s in the case of loaninterest ayment is comulsory but in the case of internal financin almost nothin is to

be done as comulsoryM so the risk of reayment related inability is decreased( No%%e %ill be introduced %ith some rofit oriented sources of finance(

aJ Undistrib#ted "r%*it and ,a)ings F#nd

The ortion of rofit %hich is inested in the business instead of distributin amonthe shareholders is called undistributed rofit( #f this undistributed rofit is ket in

searate fund for the urose of business exansion in future it is called sains

fund( Besides this tye of fund may also be created to oercome financial disasters

in future(

bJ Di)idend E7#itable F#nd

hareholders of a comany usually et diidend from the comany on a reular

basis( 8ood%ill of the comany imlicated %ith iin this diidend( #f in any year

business earns less amount of rofit then ayment of diidend is not ossible( But

inability of diidend ayment may deteriorate the business imae in the marketM so

in the year %hen the business earns hue rofit the comany kees aside small

ortion from the net rofit as diidend e:uitable fund %hich can be used to ay the

diidend also in the year %hen business earns insufficient rofit( Thus this fund

ies the business ability to ay diidend on reular basis(

1+3 E'ternal ,%#rces %*

F#nd

xternal fund means external sources from %hich fund can be collected such as fund

collected by takin a loan from bank( #t is a oular source of finance( Bank loan has

some features( 4irst5 Bank loan has a fixed term %ithin this term loan is to be utili&ed

and the rincial amount %ith interest has to be aid back to the bank( econd5 !ate of

interest remains the same for the lon eriod of its term no chane is made( Third5

!eayment of interest and installment of loan reularly and reayin the rincial

amount %ithin the term is comulsory for the business( These dues hae to be reaid

een thouh the business is not rofitable( Besides fund can also be collected throuh

sellin debentures or bonds to the bank( ellin of reference shares is another source

of external financin(

E'ternal s%#rces %* *inancing are )ery (%(#lar+ T.% reas%ns %* t$ese are

identi*iable/

aJ #f business is financed externally throuh loan then tax is imosed on the rofit leftafter

deductin the interest of loan( Thus less amount of tax can be aid(

bJ #n the case of small business many times internal financin becomes comaratielyless in

amountM as a result external sources act as the main sources of finance(


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But one roblem of external sources is the comulsory ayment of interest( #t %asreiously said that %hether rofit is earned or not business is bound to ay the

imosed interest as er schedule( This roblem doesn>t create if internal sources areused( @n the basis of terms external sources can be diided into three tyes5 aJ hortterm bJ $id-term and cJ ;on term( No% %e %ill ro% ideas of these three tyes ofsources(

1+3+0 ,$%rt Ter& ,%#rces %* E'ternal Finance

hort term means less than one year( $ost of the finances of an orani&ation are usually

collected from short term sources %hich are reaid %ithin a year( #n the case of shortterm financin an orani&ation en.oys some benefits for examle5

First/ Cost of caital from the short term sources may be comaratiely both the

hihest and the lo%est( 4or examle loan collected from the commercial bank re:uiredto ay hih rate of interest in short term( *ain different interest free sources like

urchase on credit or %aes ket due a business orani&ation can create fund for shortterm %hich has no cost of caital( Ks roducts these tyes of businessmake lan for short term roduction and thus re:uire small amount of money at a time(hort term sources of financin are suitable for these tyes of businesses(

No% %e %ill discuss about the short term sources of finance( The sources of finance of

this term can be diided into t%o tyes(


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a bit uncertain for the ne% comanies( #n such situation if lon term fund is needed itis more loical to collect that throuh leasin(

cJ Ty(es %* t$e Needs %* Finance

#f a comany %ants to buy exensie e:uiments machineries land buildins etc(

then use of lon term sources like- issuin share and debenture takin lease takinloan aainst security etc( are effectie( #f there is shortae of fund to bear the

exenditure of ra% material urchase ayin %aes ayin house rent etc( then use of

short term sources like- credit urchase receiable bill security bank oerdraft can be

acceted(

dJ C%st %* ,%#rces %* F#nd

4und can be collected from many sources( But an orani&ation takes loan from that

source %here the exenses are the least( 4or selectin a suitable source the orani&ation

measures and analyses comaratie adantaes and disadantaes bet%een the earned

income from the use of the fund and the cost of fund collection( uose a comany

%ants to buy a factory to run its actiities( o it issues shares for fund collection( But

for collectin fund throuh shares the comany has to ay diidend to the shareholders

%hich is a cost of this source( Besides the comany can mortae its roerty for

buyin the ne% factory( #f throuh such mortae the comany takes loan for lon term

it has to ay installments %ith interest to the lendin orani&ation until the loan is fully

reali&ed( *s a result this source is also exensie( The comany can accet that source

of the t%o %here the cost is least for it( @r it can collect fund by makin a rofitable

mix of the t%o sources( 'iidend of share is taxable but interest of debenture is non-

taxable( Therefore to reduce the load of tax takin loan on interest from bank or other

sources is better than collectin fund from internal sources( #n many cases more

adantaes are ot and cost is also reduced by usin a mix sources instead of usin a

sinle source(

eJ Risk %* ,%#rces %* F#nd

#f a comany takes loan aainst security then it has to kee roerties as security to the

lendin orani&ation( #f it is not ossible for the comany to reay the loan %ithin the

secified eriod then it is bound to reay the money by sellin roerty ket assecurity( *s a result in selectin the suitable source related risks of the concerned

source also hae to be considered(


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C$a(ter T.%

Ti&e al#e %* M%neyThe concet of Time alue of $oney is the root of all 4inancial 'ecision (Today>s

Tk100(00 and Tk100(00 after 10 years %ill not carry the same alue( This concet oftime alue is also necessary in our daily life( #f %e kno% by %hat rate he is calculatin

the interest of the loan taken from the money lender %e %ill be able to ealuate amon

different sources and %e can comare different sources before takin any financial

decision( This %ay %e can finance from most suitable sources (;oan taken from the

bank re:uires ayin installment as er ayment schedule( 7o% this ayment schedule

is bein measured H this chater %ill also coer this kind of mathematical roblem( To

sole these mathematical roblems scientific calculator %ill be needed( But you cannot

use financial calculator(

Picture5 Calculator

At t$e end %* t$is c$a(ter8 .e s$all be able t%

kn%./

!elationshi bet%een resent alue and future alue(

$ethod of calculatin *! Kffectie *nnual !ateJ

$ethod of calculatin the loan installment(

$ethod of calculatin the 4uture alue of ain cheme(


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2D 4inance and Bankin

3+0 C%nce(t %* Ti&e al#e/

4rom the ie% oint of finance alue of money chanes %ith the chanes of time that

means Tk( 100(00 of that time and Tk100(00 after years do not hae same alue( Tk(

100(00 of that time is more aluable( #t is the concet of time alue( $ain reason of

time alue is interest rate( ;et assume you hae Tk100(00 due to your friend( 7e told

that he %ould make ayment after 1 year instead of ayin that time( Time alue of

money says Tk100(00 of this time is not same as Tk100(00 after one year( uose

interest rate is 10 so if you deosit Tk100(00 in onali Bank then bank %ill ie you

Tk110(00 after one year( Thus today>s Tk100(00 and Tk110(00 after one year bear same

alue(

3(2 E7#ati%ns %* Ti&e al#e %* M%ney/

#n the aboe examle %e hae kno%n that if interest rate is 10 then Tk100(00 of that

time is as same as Tk110(00 in the next year and Tk121(00 after 2 years( This Tk100(00

is called resent alue and Tk110(00 and Tk121(00 are called future alue(

3(2(1 F#t#re al#e and Ann#al C%&(%#nding

#f resent alue is kno%n future alue can be found out by usin the e:uation-1 belo%5

:uation-15 4uture alue R Present alue K1S #nterest !ateJduration of years

7ere 4 is 4uture alue(

1 year after 4uture alue of Today>s 100tk R

2 year after 4uture alue of Today>s 100tk( R

Procedure %hich has been used in aboe examle to measure future alue is called

comoundin method( 7ere it is mentionable that bet%een Tk(110 after 1 year and

today>s Tk(100 rincial amount is Tk(100 %here 10 interest rate chared on Tk(100

then after 1 year rincial amount %ith interest %ill be Tk(110(The same %ay in second

year Tk(10 interest if added %ith Tk(110K%hich is rincial amount in second yearJ then

in second year rincial amount %ith interest %ill be Tk(121(That means in second yearinterest chared on rincial amount is Tk(11(Thusthe first year>s rincial amount

%ith interest if considered as a second year>s rincial amount and charin interest on

this amount is the comoundin method( #n comoundin method future alue is

measured by charin interest rate on eery year>s rincial amount %ith interest(

Therefore the interest rate %hich is bein chared on rincial amount %ith interest is

called comound interest( But in case of simle interest rate yearly interest is


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Time alue of $oney 30

E'a&(le-1/

#f interest rate is 10 then %hat is the resent alue of Tk100(00 to be receied after

years(

;et>s use e:uation5 2 to find out the resent alue of Tk100(00

7ere 4uture alue K4J R Tk100(00

#nterest rate K i J R 10

'uration KnJ R years

No% Present alue KPJ R

Puttin alue in e:uation PR

Concet5 #f Tk100(00 %ill be receied after years then resent alue is Tk+2(00

KaroximatelyJ( o if your friend ay tk(100 after years in lieu of ayin no% then

accordin to resent alue your loss %ill be K100-+2J RTk3D(00

#f interest rate is 20 then resent alue of Tk100(00 to be receied after years R

R Tk( A0(1D,

7ere it should be noted that if interest rate increase from 10 to 20 then Tk100(00 to

be receied after years the resent alue %ould not be the half of Tk+2(00( That

means increase and decrease of interest rate do not hae roortionate relationshi

%ith the time alue of money(

3(2(3 F#t#re al#e calc#lati%n by t$e #se %* c%&(%#nding &%re t$an %ncein a

year/

#n aboe examle one time comoundin in a year has assumed but sometime more

than one time comoundin may occur( uch as examle if money deosited in the

Bank it comounds monthly( That means 12 times in a year( That case e:uation has tobe chaned in t%o laces( #f it comounds many times then firstly5 interest rate has to

be diided by 12 and secondly5 Total term %ill hae to be multilied by the 12 too(

xamle-35 #f you deosit Tk100(00 in a bank at the rate of 10 comoundin and you

kno% it %ill be comounded 12 times then after one year ho% much money %ill you

otI


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E7#ati%n-3/

7ere Present alue KPJ RTk100

#nterest !ate KiJ R10

Total number of comoundin in a year KnJ R1 year

4uture alue K4J RI

By Puttin alue in :uation 4 R

R Tk( 110(A+

E'a&(le/ 5

#f you deosit Tk0 000(00 in Bank at 13( monthly comoundin then %hat amount %ill you et after 10 years(

,%l#ti%n/Present alue KPJ R Tk0 000(00

*nnual !ate of #nterest Comounded $onthly KiJ R 13(

Number of comoundin in a year KmJ R 12

Number of years KnJR 10 years

4uture alue %ith monthly comoundin K4J RI

Puttin alue in e:uation 4 R

R 0 000(00 3(D2D

R Tk( 191A23(02

Concet5 o today>s Tk0 000(00 and to be receied Tk191A23(02 after years of the

same olicy has e:ual alue(

3(2(A Calc#lati%n %* "resent al#e by disc%#nting &%re t$an %nce in a year/

#f %e ay attention from different ie% oint in aboe examle %e can et the

kno%lede of resent alue that Tk( 191A23(00 to be receied after years Tk( 0

000(00 hae to be deosited( Thus resent alue of Tk( 191A23(00 is Tk( 0 000(00( #f

%e kno% the future alue then %e can easily find out the resent alue( This tye of

calculation is called the discountin method( #n case of comoundin more than once in

a year %e %ill find out the resent alue from the future alue throuh discountin(

This situation can be exlained throuh an examle5


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E'a&(le-6/


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*t 1 %eekly comoundin *! is bein calculated throuh the alication of

follo%in e:uation5

E7#ati%n/ *! R K*!R ffectie *nnual !ateJ

7ere *nnual #nterest !ate Comounded


45/143

#n aboe art %ithin the bracket is called The :uation of *nnuity( Puttin alue in

e:uation %e %ill find a factor %hich can be used to calculate the loan( 7ere the alue

of this factor is5

Concet5 o ettin Tk+(1A at resent each year 10 installment at Tk1 er installment

at the rate of 10 interest %ill hae to be reaid( The same %ay if it is tk(1000 for eachinstallment then loan %ill be Tk+(1AU1000 R Tk+1A0(00

3(A(2 Calculation of early #nstallment5

*ain usin same e:uation amount of yearly installment can be calculated5

E'a&(le/

s business(

imilarly if the income of a comany is retained %ithout distribution amon the

shareholders it has an oortunity cost from the ersectie of shareholders( #f the

comany not retainin as resered income distributed the rofit amon the

shareholders the shareholders could earn extra income by inestin it else%here( Thus

if the comany does not distribute its earned rofit or income the shareholders are

deceied of ettin income from inestin it else%here( 7ere bein deceied of ettin

income from inestin it else%here is termed as oortunity cost of the resered

income( 4or examle if a comany distributes the %hole amount of its earned rofit

amon the shareholders and the shareholders earn at the rate of 1 by inestin it

else%here then 1 %ill be the oortunity cost of comany>s resered income(

+(A A)erage C%st %* Ca(ital

Throuh the aboe methods %e learned that costs of different sources of caital are

different( 4or examle the cost of loan caital is of one tye on the other hand the cost

of share caital is of another tye( Then naturally :uestion %ill be raised that %hen a

business enterrise uses some loan caital and at the same time some share caital%hat %ill be the cost of caital of the enterrise thenI The ans%er is5 aerae of the all(

The thin is described %ith the follo%in examle5

E'a&(le5 * comany has 2000 million eneral share caital 2000 million loan caital

and 1000 million riority share caital( The rate of interest of loan caital is 10 and

rate of diidend in riority shares is D( The market rice of eneral shares and riority

shares are 2 taka and 110 taka resectiely( The comany has ien diidend 13 taka

er share to the shareholders this year and the diidend has increased at A from the

rate the comany ae earlier( #f tax rate is A0 %hat is the aerae cost of caital of

the comanyI

,%l#ti%n5

Cost of loan caital R 10 x K1 H Tax rateJ R 10 x (+ R +

Cost of riority shares R K'iidend er share Y $arket rice of shareJ

R D Y 110 R ,(2,

Cost of eneral shares R13K1 S (0AJ

L2 S (0A R 9(30

No% %e are to find out %hat ortion of the total caital of the comany is each source

of caital( 4rom the ien information it is understood that in the total caital ortionof eneral shares is K2000L000J or A0 ortion of loan caital is K2000L000J or A0and ortion of riority shares is K1000L000J or 20( The aerae cost of caital of the


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,2 4inance and Bankin

Read t$e *%ll%.ing stilant and ans.er 7#esti%n n#&bers ; and

s business is 10 million taka of %hich +0 is his o%n financeand the rest is loan at 1( 8ettin an inestment oortunity of 20 rofit hechanes the caital structure( *s a result an oosite relation is created bet%een loan

and o%n finance(,( W$at is t$e l%an ca(ital %* T#t#l4s b#siness at (resent

aJ 20 lac bJ A0 lac

cJ +0 lac dJ , lac

D( In c$anging t$e ca(ital str#ct#re8 Mr+ T#t#l $as c%nsidered 2

iJ @ortunity cost of financin

iiJ *erae cost of caital

iiiJ ;east cost of caital

W$ic$ %* t$e *%ll%.ing is tr#e

aJ i and ii bJ i and iii

cJ ii and iii dJ i ii and iii

>#esti%ns %* ,$%rt Ans.ers

1(


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C$a(ter ,e)en

,$are8 B%nd and Debent#re

hare Bond and 'ebenture issued by comanies are taken as different tools of

inestment for the inestors( ach of these tools of inestment used as sources ofinestment has its indiidual features adantaes and disadantaes( xected income

and risks of the inestors from these tools of inestment are different( o an inestor

should kno% about different sides of each of these tools of inestment before takin his

decision for inestment( #n this chater %e shall be able to kno% about these tools of

inestment from the ersecties of the inestors(

A*ter .e $a)e st#died t$is c$a(ter8 .e .ill be able t%

'escribe the concets of share bond and debenture(

Classify different tyes of shares(

#dentify the comaratie differences amon different tyes of shares(

Be able to describe the differences bet%een bond and debenture(

Be able to exlain diidend olicy(


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,A 4inance and Bankin

,(1 Intr%d#cti%n

#n the reious chaters you hae kno%n about eneral share riority share bond

and debenture as sources of financin in business firms( These tools of financinissued bycomanies are considered as sources of inestment for the inestors( *ninestor caninest his money in different sectors( *ssume your father has 10 lac

taka( 7e canaccordin to his %ish ut it in a bank as fixed deosit or he can inest itin one or moretools of inestment H eneral share riority share bond and debentureissued by comanies( *s sources of inestment each of these has its o%n secialfeatures( xected income and risks of the inestors from each of these tools ofinestment are different( ecial features and adantaes-disadantaes of each ofthese as source of inestmentand their comaratie ealuation hae been discussed in

the follo%in ararahs(

,(2 9eneral ,$are

ellin of shares is an imortant source of atherin fund for ublic limited comanies(The oluminous total caital of the comany is diided into small Ke:ualJ units andthose are sold as shares( *fter atherin minimum caital %ith the aroal of theoernment alications are inited from the ublic throuh iin an adertisement inthe ne%saer %ith ublishin a aer of statement %ith information about thecomany(


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,(3 "ri%rity ,$are

#nestment in riority shares is considered a ood tool of inestment for those inestors%ho exect income at a certain rate from their inestment in shares( 7o%eer in our

country riority shares are not found so much( ;ike that of eneral shares riorityshares also hae some o%n features and characters5

aJ O.ners$i(/ Priority shareholders are not told full o%ners of the comany(

They are considered in bet%een the o%ners of eneral shares and the o%ners ofbonds and debentures(

bJ Trans*%r&ability/ 4or many riority shares alternatie otions are there to

transform them into eneral shares( o if the inestor %ishes he can chane hisstatusto an o%ner of eneral shares(

4rom the ersectie of the inestors riority shares hae some adantaes and

disadantaes( The adantaes and disadantaes of riority shares are discussedbelo%5

Ad)antages

aJ Inc%&e at Certain Rate/ The o%ners of riority shares et diidend at somecertain rate( *s aresult the shareholders hae less uncertainty of income(

bJ "ri%rity %n "r%*it Inc%&e/


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Bond has some articular o%n features and characters from the ersecties of

inestors( Those are discussed belo%5

aJ M%rtgage/ * comany usually kees its roerty or documents as mortaeaainstbonds( *s a result if the comany is not able to meet the claims of theinestors theycan reali&e their money by sellin these roerties(

bJ Date %* Mat#rity/ * bond issued by a comany has some certain date ofmaturity( @n that date of maturity the inestor ets back the %ritten alue asmentioned in the bond(

cJ Credit%r/ Bond o%ners are considered as the creditors of a comany( o theyhae

no otin riht(

dJ Trans*%r&ability/ $any a time a comany may sell transferable bonds to the

inestors( #n such cases if the bond o%ners %ish they can transform the bonds at theirossession to certain number of eneral shares as mentioned in theconditions ofthe debenture(

Ad)antagesaJ Rate %* Interest/ *s the rate of interest is fixed the income of the inestors inbonds is fixed(

*s a result they hae less uncertainty of income( 7o%eer sometimes the rate of interest may

also chane(

bJ Less Risk/ *s immoable or other roerties are ket as mortae aainstbonds the risk ofinestors in bonds decreases(

cJ Rig$ts %n "r%*it and "r%(erties/ Bond o%ners are ien interest on theirinestment at theery first from the income of the comany( @n the other hand at the time of li:uidation orclosure of the comany claims of the bond o%nersare first met before meetin the claims ofothers( That is the claims of bondo%ners et riority oer the claims of the eneral and riority

shareholders(

Disad)antages

aJ Less Inc%&e Rate/ *s there is less risk in bonds comared to eneral shares and riorityshares the rate of income of the bond o%ners is less(

bJ C%ntr%l/ *s like that of riority shares the bond o%ners do not hae otinriht they cannotinole themseles in the control of the comany(

,( Debent#re'ebenture is a bond %ithout mortae( o most of the characteristics of bonds reailin debentures( ;ike bond and riority shares debentures are also not found so much inour country(

Comared to bond its secial feature is there is no mortae aainst debenture( *sthere is no mortae aainst debentures inestors do not buy debentures of all

comanies( #nestors usually inest their money in debentures issued by bi reno%nedcomanies(


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Ad)antages and Disad)antages %* Debent#re

*s a tool of inestment some adantaes and disadantaes of debentures are as follo%5

Ad)antages

aJ Reg#lar Inc%&e/ ;ike that of bonds an inestor ets a reular income at somefixed

rate from debentures(

bJ Fi'ed Ter&/ 'ebenture is oular to many inestors for its fixed term(

Disad)antages

aJ N% ,ec#rity %r M%rtgage/ ince there is no mortae aainst a debenture it is risky(

bJ C%ntr%l/ ;ike that of bonds an o%ner of debenture does not hae any otin riht( 7enceo%ners of debenture hae no control in the oeration of thecomany(

cJ Rig$ts in "r%*it and "r%(erty/ *n o%ner of debenture en.oys an e:ual status of eneralcreditors( o before ayin interest to the o%ners of debentureinterest of the bond o%nersis aid from the income of the comany( #n this%ay at the time of li:uidation or closure ofthe comany claims of the debenture o%ners are met after meetin the claims of the bond

o%ners(

,(+ ,$are Market %* Banglades$

*s a caital atherin market share market lays an imortant role in the economy ofany country( 4or this reason eneral eole or an inestor exects that share market isrun smoothly(


90/143

#n the t%o stock exchanes as mentioned aboe eneral shares mutual funds

debentures bonds etc( of different comanies are bouht and sold( 4or the conenienceof the inestors for takin inestment decisions the shares of the comanies scheduledin the stock market hae been classified in different tyes as * B 8 N 6 etc(

"sually indexes are used to understand the trend or oerall condition of the share

market( 4or examle in 'haka tock xchane the follo%in three indexes are used

namely5

aJ *ll hares Price #ndex

bJ ' 8eneral #ndex and

cJ ' 20 #ndex

#n this %ay in Chittaon tock xchane three indexes are used namely5

aJ C *ll hares Price #ndex

bJ C electie Cateories #ndex and

cJ C 30 #ndex

#ndexes of share market rise and fall eeryday and eery time( These rises and falls

roide information about the trends and directions of the market( The rises and falls ofthese indexes deend on the rises and falls of share rices of the comanies scheduled

in the share market( #f the rices of most of the shares increase the indexes increaseM

aain if the rices of most of the shares decrease the indexes decrease(

,(, ,yste& %* In)est&ent in ,$ares

#nestors can inest in share markets in t%o %ays5

aJ Throuh Primary $arket

bJ Throuh econdary $arket(

aJ "ri&ary Market/ Primary market means that market %here a comany announces the initialublic offerin K#P@J for sellin its shares(


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hare Bond and 'ebenture D2

Creati)e >#esti%ns

1( *fter retirement from oernment serice hahinur ets a fe% lac taka in hand(

7e is %illin to inest this money in comanies( 7e %ants to be such an inestor

so that he %ill not hae to et any interest and can articiate in takin imortant

decisions of the comany( o he has collected information of the actiities ofVur.adoy> and Voikat> comanies and no% he is doin analysis of the

information(

a( comanies is hahinur analy&inI

xlain(

d(


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95/143

C$a(ter Eig$t

C#rrency8 Bank H Banking

By readin this chater students %ill learn about the history of currency its ealuation

and resent condition( $oreoer they %ill also kno% about the uses and necessity ofcurrency and the relation bet%een currency and bankin(

*fter readin this chater students %ill also be able to imroe their idea about creation

of bank bankin system and bankers as a result of multile uses of currency( The

history of bankin business and ealuation has also been discussed in this chater in

addition to a brief discussion on the resent bankin system of Banladesh and its

history(

A*ter st#dying t$is c$a(ter8 st#dents .ill be able t% kn%. ab%#t/-

The currency and history of currency(

!elationshi bet%een Bank Bankin and Banker(

7istory of bank business and its olution(


96/143

DA 4inance and Bankin

exended much and alon %ith them human

necessities started to increase( The horse carriae boats and in later times the shis

made an imortant contribution behind it( *fter the remoal of communication

roblems the efforts of collectin the necessary commodities %ere increasin from

different eorahical ositions( 4rom illae to illae from illae to to%n and from

country to country the necessity of the medium of exchane in case of exchanin

commodities %ere felt intensely( xcet the medium of exchane the ilin of deosits

and the measure of alue of commodities had layed a reat role for the creation of

currency(

The history of currency is ery ama&in( #t is seen from the aes of history that coins

of different tyes and shaes %ere used in different countries in different times( #ndifferent aes the uses of ko%ri the teeth of shark the teeth of elehant KioryJ stone

earl burnt clay bron&e siler and old %ere used as coins Kas the medium of

exchaneJ(

Pictures5 Coins of different times made of bron&e earls and the teeth of elehant(

The uses of metal coins did not last for a lon time because of some difficulties in their

uses carryin transortation and other necessities( The use of metal coins increased

%ith the increase of %orld oulation( o the suly of metal became short more oer

because of the uses of old and siler .e%elries and other ob.ects use of the aer

money %as introduced in the nineteenth century( Thouh at resent metal coins bein

used %ith the aer money yet the uses f metal coins are radually becomin limited(

"sin aer money has been reatly increasin because of aailability of aers easy

transferable and comatibility to different tyes of security measures(


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D(2 W$at is C#rrency

@n the basis of function by the term Vcurrency> %e mean a medium of exchane%hich is accetable to all and %hich %orks as a scale in measurin alues and

medium of sains( 4rom this definition %e can understand that currency has the

follo%in functions5

#t %orks as the medium of exchane( Currency can be used for any kind of

transaction( 4or examle5 ou send money to buy a book( 7ere the currency

%orks as the medium of exchaneM this is the main function of currency(

#t %orks as the means of sains( #t means that %hen you %ant to sae for future

you can make this sains throuh money( #f there is no existence of money your

sains %ould hae been ery difficult(

#t %orks as the measure of alues( #t means it is a %ork of currency todetermine the rice of economic oods or serice( Because of existence of money

%e can easily determine the daily %aes of a labour %e can determine the rice of

book as Tk(100 and the rice of 1 k rice as T=(2( #n these %ays the economicactiities become easier for us(


98/143

* bank forms its deosit by collectin surlus money from eole as sains( 4or

deositin money the deositor is offered a fixed rate of interest or rofit( The bank

earns rofit by lendin these deosits as loan charin hiher rate of interest to the

borro%ers( *s the bank cannot run %ithout currency so on the uses of currency is

limited %ith the bank(

D(A Bank8 Banking HBanker/

#t is difficult to ie a definite account of the oriin of term VBank>( The literary

meanin of the VBank> is the storae of articular thins treasury een this term is used

as lon table( *ccordin to some economists the term VBank> is oriinated from the

ancient ;atin %ords Banco, Banak, Banque, Bancus etc( *ccordin to the follo%ers of

this oinion the ;atin meanin of the term VBank> is bench or lon table used for sittin

on its suort is found in the aes of history(

#n the economic history of middle ae it is found that some eole of the ;ombardy

treet in #taly used to run the business of deositin lendin and borro%in money

usin a lon tool or bench( o more suorts are found on the ;atin oriin of the term

VBank>(

To ie the definition of bank %e can say that bank is a financial institution %hich

collects the deosits from eole aainst interest and makes inestment for earnin

rofit and is bound to return the money to the deositors at the moment they ask or after

a fixed time( *ccordin to @xford 'ictionary FBank is a safe orani&ation for

deositin %ithdra%in and iin loanG( Therefore the term VBank> ies the

elaborate concet about the bankin actiities( #t means all the leal actiities of bank

are kno%n as bankin(

T$e &ain acti)ities %* bank8 .$ic$ is als% kn%.n as banking8 are

&enti%nedbell%./

De(%sit c%llecti%n *r%& t$e (e%(le5 Peole %hose income is reater than their

exenses are the otential deositors( Bank collects deosit from them(

L%an ,ancti%n5 #f exense is hiher than the income then it creates thedeficiency of

money( Banks sanction loan to oercome this deficiency(

Disc%#nting and a((r%)ing Bills %* E'c$ange5 *nother actiity of bank is

discountin the receiables and aroin the bills ayable(

Finance in *%reign trade and in Letter %* credit/ xorters and imorters arere:uired to conert home currency into forein currency and forein currency into

home currency( This imortant actiity is erformed by a bank( *ainthrouh the

letter of credit a bank ensures the exorter to reay the amount ofbill on behalf of

the imorter( Thus by actin as a mediator a bank accelerates forein trade(

M%ney trans*er/ Banks roide suort in transferrin the money from onelace

to another and also from one country to another country by conertin


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E'ercise

M#lti(le C$%ice >#esti%ns/

1( #esti%ns/

1( oriinate fromI

2( #esti%ns/

'urin a liht conersation %ith her randmother eema came to kno% that in the asteole %ould exchane their roducts %ith each other accordin to their needs but it%as not ossible to exchane all kinds of roducts(

1( Peole on those days %ould exchane roducts to H

iJ strenthen their social bondae

iiJ meet their demand

iiiJ exchane additional roduct

W$ic$ %* t$e *%ll%.ing state&ents is c%rrect

*J i and ii BJ i and iii

CJ ii and iii 'J i ii and iii

1+ T$r%#g$ .$ic$8 (r%ble&s %* barter trade is re&%)ed

*J inention of shi

BJ introduction of metal coins

CJ imroement of eorahical connectiity

'J increase of eole>s demand


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C$a(ter Nine

Banking B#siness and Ty(es

tudents %ill hae an idea about formation of banks their scoes ob.ecties and

manaement system from this chater( * brief concet on different tyes of bankinsystem has been disseminated here by classifyin them( Besides an idea of

oernmental and non-oernmental bankin manaement has also been ien in a

limited scoe( This chater %ill also be useful to hae a rimary concet of bankin

Picture5 Transaction at a bank

A*ter .e $a)e st#died t$is c$a(ter .e s$all

Be familiar %ith the ob.ecties of banks

=no% rinciles of banks

;earn the classifications of bank

!econi&e the differences bet%een oernmental and non-oernmental banks(


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2( Ca(ital F%r&ati%n/ * bank collects scattered sains of the society throuh deosit

collection and roides loans to lare industries( $otiatin eole forsains and formincaital is one of the main ob.ecties of the oernment(

3( In)est&ent and Ind#striali?ati%n/ Before sanctionin any loan a bank analy&es the

rosect of business of the ro.ect( The oernment kees onresentin riority sectors

to the eole and the nation( Banks articiate %ith the oernment in achiein thisob.ectie throuh sanctionin loan on rioritybasis(

A( C%ntr%lling M%ney Market/ Both the oernment and the central bank al%ays control

money market in order to control inflation( 7o%eer the central bankalone cannot do thisalone( Commercial banks extend their suort to theoernment and the central bank(

( E&(l%y&ent 9enerati%n/ radication of unemloyment roblem is one of the ob.ectiesof bankin sector( The ro.ects in %hich banks finance can createemloyment( 4or anexamle5 by makin inestment in a labour intensiero.ect instead of caital intensie

ro.ect a bank can create emloyment andthus can hel the oernment(

KCJ Obecti)es *r%& t$e client4s (ers(ecti)e/

1( De(%sit/ Banks create deosit by collectin scattered sains of their clients(

No interest is offered in current account but lots of serices are offered( #n aain *ccount a client receies around , interest and deosits can be

%ithdra%n at any time( #n a 4ixed 'eosit *ccount interest rate is around 13but if deosit is %ithdra%n before the exiry of the term this account %ill notbe rofitable( 'uration of 4ixed 'eosit *ccount is any eriod startin fromone month( Proidin suort to the deositor to form any amount of deosit isone of the basic resonsibilities of banks(

2( ,ec#rity/ 8iin security to the client>s aluables is another ob.ectie of bank(

#n our society keein these aluables at our home is not secured(

3( Ad)is%r and C%ns#ltant/ Before sanctionin the loan a bank ealuates thebusinessrosect of the ro.ect( Profitability of the business is as imortant forthe loan alicant asit is for the banks( Professional efficiency of the bank strenthens to the client inmeasurin rofitability of the business( * bank sometimes acts as an adisor %hen any

exansion or moderni&ation is re:uiredfor the business( arious other financial adices areroided by banks as %ell(

A( Re(resentati)e and Tr#stee5 #n exchane of receiin alue a bank acts as a

reresentatieLtrustee to its clients( Banks take art in different business contract on behalfof clients(

( M%ney Trans*er/ Banks transfer money from one lace to another %ithin andoutside thecountry accordin to clients> re:uirements(


105/143

+( De)el%(&ent and ease %* standard %* li)ing/ Banks introduce arious ne% andinnoatie roducts and serices to imroe eole>s standard of liin( Buyers can

urchase roducts %ithout cash for a secified time eriod( Cash can be receied 2Ahours a day by usin *T$ machine( No%-a-days bankin actiities are oin on in eery

bi city all oer the country( This serice has been made een easier throuh mobilebankin and internet bankin(

=+1 ,tr#ct#re %* a Bank/*ccordin to the reulation of the central bank a riate bank can be established by the

minimum 2 and maximum 13 directors( But to set u a bank o%n by a ublic limitedcomany the minimum number of members is , and maximum is unlimited(stablishment of a commercial bank is not ossible in Banladesh %ithout aroal ofBanladesh Bank( #f any bank conducts business in Banladesh %ithout aroal of

Banladesh Bank by the names of cooeratie bank or any other name it is consideredilleal(

Based on oerational manaement bankin in Banladesh is run accordin to thediaram number 9(1( $anaement rocess of a oernment bank slihtly differs to that

of non-oernment bank( *ccordin to the diaram the hihest osition of oernmentbank is Chairman( Then ste by ste the ositions of $anain 'irector *dditional$anain 'irector *ssistant $anain 'irector 8eneral $anaer 'euty 8eneral$anaer enior @fficer enior xecutie and finally xecutie( #n Priate Bank

hihest osition is held by the Chairman and lo%est osition is @fficer(

8oernment bank Priate bank

'iaram5 9(15 $anaement system of oernment and non-oernment banks


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9(3 / "rinci(les %* Banking

B#sinessBankin is a risky business( !isk cannot be aoided %ithout establishin a deendableand efficient manaement system( ery bank should follo% some fundamental

rinciles to aoid the risk %hich arises in usin others> money in bankin %hich are

stated belo%5

1( "rinci(le %* ,ec#rity/ *n imortant rincile in bankin is ensurin thesecurity ofclient>s money and the money that has been ien as loan( Before sanctionin loan a

bank should ealuate the financial solency and honesty andkee security aainst theloan(

2( "rinci(le %* "r%*itability/ arnin sufficient amount of rofit is anotherrincile of

banks( * bank roides lo%er rate of interest to the deositor butchares a hiherrate of interest to the borro%ers( The difference bet%een these t%o rates is the main

ortion of the rofit ercentae of bankin(

3( Li7#idity "rinci(le/


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11( "rinci(le %* De)el%(&ent/ *ll actiities of the bank taret economicdeeloment

and bankin deeloment(

12( "rinci(le %* Obecti)es/ conomic ocial deeloment and rofit earnin byinestin in rosectie ro.ects and re.ectin the unroductie and uncertain

ro.ects are the rinciles of achiein ob.ecties(

13( "rinci(le %* Ec%n%&y/ Proer utili&ation of fund throuh cost minimi&ation isanotherrincile(

1A( "rinci(le %* Tr#st/ * recondition of bankin business is clients> trust on bank(

Banks maintain secrecy roide locker serices ayback deosited money act asadisor all these actiities are the identity of banktrust%orthiness(

1( "rinci(le %* Ca#ti%#sness5 Banks collect lots of information to aoid fallin inlossesas it does business %ith borro%ed money(

1+( "rinci(le %* ,(eciali?ati%n/ #n case of forein trade loan sanction note issue etc(re:uire to follo% seciali&ation( This increases functional efficiency and :uality(

9(A Classi*icati%n %*

Bank/

@n the basis of structure formation o%nershi reistration reion bankin businesscan be classified as er the chart number 9(25

A@ ,tr#ct#ral Classi*icati%n/

1( Unit Banking/ #f bankin actiities are oerated in a secified reion it is called"nit Bankin( "nit bankin has no branch( #n Banladesh there is no tradition of unit

bankin has no tradition(

*J ,tr#ct#ral Classi*icati%n

1( "nit Bankin

2 Branch Bankin

3( Chain Bankin

A( 8rou Bankin

BJ F#ncti%nal Classi*icati%n

1( Central Bank

2( Commercial Bank

3( *ricultural Bank

A( #ndustrial Bank

( Cooeratie Bank+( #nestment Bank

,( ains Bank

D( $ortae Bank

9( Transortation Bank

10( mall and Cottae #ndustrial Bank

11( #mort-xort Bank

CJ Classi*icati%n By B#sinessOrgani?ati%n

D@ Classi*icati%n by O.ners$i(1( 8oernment Bank2( Priate Bank3( N8@ BankA( *utonomous Bank( Partial Bank+( 4orein @%nershi Bank

J Regi%nal Classi*icati%n1( !eional Bank2( National Bank3( #nternational Bank

4J Classi*icati%n by Registrati%n

1( 'omestic Bank2( 4orein Bank8J Classi*icati%n by ,(eciali?ed Clients1( ;abour Bank2(


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Besides in #slamic bankin seeral other roducts like kard-a-hasan by-mua&&el by-

salam etc( roducts are also aailable in Banladesh( #n Banladesh follo%in #slamic

banks are in oeration5

1( #slami Bank Banladesh ;T'(

2( *l- *rafah #slami Bank ;T'(

3( ocial #slami Bank ;T'(

A( xim Bank ;T'(

( hah.alal #slami bank ;T'(

+( 4irst ecurity #slami Bank ;T'(

,( #CB #slami Bank ;T'(

M#lti(le C$%ice

>#esti%ns/

E'ercise

1(

3( belon toI

*J structure-based BJ o%ner-based

CJ control-based 'J secial client based(

A(


113/143

,$%rt Ans.er >#esti%ns/

1( %as established in 200D by takin leal aroal( !ecently a ersonhas alied

for a loan of tk(1(0 lac to this orani&ation( 7e is caable to reay theloan and interested to

mortae his land( But there are some discreancies in thedocuments he has sulied(

1(


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C$a(ter Ten

An Intr%d#cti%n t% C%&&ercial Banks

tudents by studyin this chater %ill be familiar %ith arious commercial banks

%hich lay ital roles in the current %orld-economy( They %ill kno% about ma.or anddistinct aims and functions of commercial banks their role in buildin the society

suort in imort and exort transfer of funds and deeloment of ariculture and

industry(

A*ter .e $a)e st#died t$is c$a(ter8 .e .ill kn%.

ab%#t @b.ecties and functions of commercial banks

ources of income and funds of commercial banks


115/143

*n #ntroduction to Commercial Banks 103

0+ Intr%d#cti%n

( Commercial bankin system

has come throuh a lot of moderni&ation and seciali&ation throuh aes( "suallycommercial banks collect money from eole that are surlus after meetin theiressential re:uirements and lend it to the borro%ers( * commercial bank is a rofit

oriented orani&ation that makes rofit by makin deosit transaction and lendin ofmoney(

oVThe tye of orani&ations %hich make transaction of money or serice exchaneable

throuh money are called commercial bank(>

10(1 Obecti)es %* C%&&ercial Banks

*lthouh commercial banks are mainly established for makin rofit they hae someother ob.ecties( @b.ecties of commercial banks are discussed belo%5

1J Making "r%*it5 Commercial banks are established %ith the fundamentalob.ectie of

makin rofit(

2J Medi#& %* E'c$ange/ Commercial banks introduce che:ues bills of exchane etc( as

mediums of exchane(

3J Ca(ital F%r&ati%n/ Collectin surlus money from the eole and formation of

caital is one of the main ob.ecties of commercial banks(

AJ Wel*are %* "e%(le/ Public %elfare is an indirect ob.ectie of commercialbanks(

J Assisting in Reg#lati%n %* L%ans/ Particiatin and assistin the central bank in

formation of loan olicy and loan reulation is one of the ob.ecties of

commercial banks(

+J Assisting in "lanning and I&(le&entati%n/ *nother urose of commercialbanks

is to assist the central bank in roer deeloment lannin andimlementation(

,J "r%(er Distrib#ti%n %* Wealt$/ nsurin roer distribution of %ealth bydeeloin

all sectors of economy in an e:ual ace throuh usin monetary assets is another

ma.or oal of commercial banks(

DJ E&(l%y&ent 9enerati%n/ * urose of commercial banks is to createoortunities

for ne% emloyment by increasin economic actiities(

9J Mitigating 9a( bet.een Ric$ and "%%r/ Throuh collectin deosit and offerin

loans commercial banks enable articiation of all class of eole in economic

actiities %hich hel mitiate economic as bet%een rich and oor classes of the

society(

10J F%r&ing a ,a)ing-tendency/ *nother urose of commercial banks is to create a

sain tendency amon eole(

11J ,ec#rity/ nsurin security of money aluable ornaments of eole is one of the

uroses of commercial banks(


116/143


117/143

J Creati%n %* Ca(ital/ Banks create caital by accumulatin all searate sainsof eole

throuh different accounts(

+J Iss#e N%tes/ Notes are usually not issued by commercial banks but by centralbank( But

commercial banks issue notes in indirect forms( 4or examle if youhae a deosit of taka

1 lac in a sain account of onali Bank and if you buy a comuter costin taka +0

thousand you can make the ayment throuh a checkfrom your account( Thus sometimes

bank che:ues sere as a medium of exchane as an alternatie to notes issued by the

oernment(

,J ,er)ice as Tr#stee/ Commercial banks sere as trustee of roerties of theircustomers

and issue solency certificates to them(

DJ Assistance in I&(%rt and E'(%rt/ *n imorter needs to conert local currencyinto forein

currency %hile an exorter needs to conert forein to local currency %hich is one of the

functions of banks( $oreoer banks arrane forayment to the exorters on behalf of the

imorters throuh letter of credits K;CJ in international business( ;etter of Credit lays an

imortant role in internationaltrade by creatin financial and business connections bet%een

imorters and exorters( Proidin oeratie assistance and suestions in imort and

exortrelated functions are reresentatie .obs of commercial banks(

9J ,er)ice as a 9%)ern&ent Treas#ry/ Central bank or any other selected bankseres as

the treasury of the oernment(10J C$ange Bill %* E'c$ange8 Bill %* Trans(%rt etc+/ Banks chane bills ofexchane bills of

transort etc( in faour of its clients(

BJ ,(ecial and Ot$er F#ncti%ns

1J In)est&ent %* Ca(ital/ Besides accetin loans banks inest caital inindustrial lants

and commercial orani&ations %hich hel increase ross national roduction and caital

mobili&ation(

2J R%le in Ec%n%&ic 9r%.t$/ Banks hel a country>s oerall economic ro%thesecially

deeloment of trade commerce transortation communication housin and education

etc(

3J M%ney Trans*er/ Banks transfer money inside and outside the country throuh their

mediums of exchane(

AJ ,ec#rity %* M%ney/ Banks ensure security of ublic money by keeindeosits( Besides

clients can also rotect ornaments documents of theirroerties in banks by usin locker

serice(

J 9#idance/ @fferin arious tyes of business uidance %hen souht by theclients and

manaement of their roerties for examle collectin house rentsare also included in the

functions of banks(

+J E&(l%y&ent 9enerati%n/ *s a monetary orani&ation banks hel in emloyment

eneration and indirectly create ne% emloyments by sulyin loans in a country>s

economy(


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,J L%an Reg#lati%n/ *s the reulator central bank reulates suly of money and loans

by exandin and contractin loans ien by the commercial banks( This is ital for

ensurin economic stability and reulatin inflation of money(

DJ Agric#lt#ral De)el%(&ent/ Banks facilitate aricultural deeloment byofferin loans

and other assistance in this sector(9J Ind#strial De)el%(&ent/ Banks assist industrial lants by offerin lon-termloans(

10J Regi%nal De)el%(&ent/ !eional deeloment is also suorted by banks as they hae

net%ork of branches in different areas of the country(

10(3 ,%#rces %* F#nds %* C%&&ercial Banks

Commercial banks usually collect funds from the follo%in sources some of %hich are

external sources and some of %hich are internal sources(

1J "aid Ca(ital/ 4irst and foremost source of banks is aid caital( The caital is

roided by the o%ners for .oint stock comany and in cases of .oint caital

comany caital is formed by issuin shares(

2J Reser)e *#nd/ *t the time of declarin diidend a certain ortion of the rofit is set

aside eery year %hich is called resere fund( This is fund is used as caital in

future(

3J De(%sits/ Public deosits are a o%erful source of funds to a commercial bank(

There are three tyes of bank deosits KiJ current deosits KiiJ sain deosits

and KiiiJ time deosits %hich the clients do not %ithdra% all at once( o the

bank can earn more caital by usin this money as loans or business

inestment(

AJ B%rr%.ing/ Commercial banks in times of emerency borro% loans from thecentral

bank or from other commercial banks of the country( They can alsoraise funds by

issuin security bonds credit certificates etc(

10(A ,%#rces %* Inc%&e %* C%&&ercial Banks

Commercial banks earn money throuh different businesses %hich are detailed belo%

1J Interest %n L%ans/ Commercial banks lend money to the industrialists traders or

consumers and chare interest on the loans( This is their main source of theirincome(

2J In)est&ent/ Commercial banks earn rofit by inestin in rofitable sectors like

shares issuin letters of credit oernment security etc(

3J Bill Disc%#nt/ Commercial banks also earn money by makin discountedayment of

bills of exchane in adance(


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120/143

9J Tariffs and taxes

10J #nsurance Premium

11J Chares for makin corresondence throuh ost office telehone telex faxs%ift

etc(

12J *dertisement cost

13J Trainin chares of the emloyees

E'ercise

M#lti(le c$%ice 7#esti%ns

1(


121/143

,$%rt 7#esti%ns/

1(


122/143


123/143

Bank 'eosit 111

11( Intr%d#cti%n'eosit is the main source of fund in bankin( Bank deosit or transaction is enerally

done throuh clients bank accounts( * client can %ithdra% money by usin che:ues or

other bankin roducts(

11(1 "#r(%ses and I&(%rtance %* Bank De(%sits

#mortance of bank deosit or bank account has comletely different sinificance from

the client or deositor>s and bank>s ersecties( *ain in mirco-economics bank

deosits lay some imortant roles( These are briefly demonstrated in the chart belo%5

F%r Clients F%r t$e Bank R%le in Micr%-

Ec%n%&ics

1( ecurity of

deosited

money

2( Business

transaction

3( ;oan facility

A( !isk-free

inestment

( *ailin serice+( $eetin demand of

1( !eceiin deosit

2( #nestment

3( 4orein xchane

1( Creatin a habit of

sain

2( Buildin caital

3( #nestment and

roduction

A( #nternational trade

Chart number5 11(15 Puroses of bank deosit

*J F%r Clients/

1J ,ec#rity %* De(%sited M%ney5 @ne of the main uroses of bank is to ensure security of

deosited money of the clients(

2J B#siness Transacti%n/ Banks make business transaction throuh cash or otherbankin

roducts such as che:ues bills of exchane bank draft etc(

3J L%an Facility/ Banks offer loan to its current or sains account holders ifneeded( To

receie this facility its necessary to oen a bank account(

AJ Risk-*ree In)est&ent/ Banks offer interests in certain rates to its deositors( #t does not

inole any risk like makin an inestment in the share market(Therefore it is a risk-free

inestment(

J A)ailing ,er)ices/ Banks offer arious serices to its inestors %hich articiatin and

assistin the central bank in formation of loan olicy and loan reulation is one of the

ob.ecties of commercial banks(

+J Meeting De&and %* E'cess F#nd/ Banks allo% their clients to oer-draft so that they

become attracted to deosit money(


124/143


125/143

1J C#rrent Acc%#nt/ The kind of account that facilitates a client to deosit and %ithdra%

money %heneer a client %ants is called a current account( This tye of account is more suitable

for businessersons and usually no interest is offered for such an account( $ore than deosited

amount of money can be %ithdra%n insuch an account(

2J ,a)ings Acc%#nts/ The account in %hich money can be deosited any time but%ithdra%n t%ice

a %eek or in such reulated fre:uency is called sains account( "sually fixed income eole%ho are not inoled in business oensuch accounts( * sm

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