Commerce · Ch 4 — Sources of Business Finance
Key Terms
Key Terms
- Finance — the money a business needs to establish and run its operations.
- Owned capital — funds provided by the owners of an enterprise (including reinvested profits); not repayable during the life of the business.
- Borrowed capital — funds raised through loans or borrowings, repayable with interest after a set period.
- Fixed capital — funds used to buy long-term fixed assets such as land, building, plant and machinery.
- Working capital — funds used for day-to-day operations and to hold current assets and meet current expenses.
- Short-term sources — sources providing funds for a period not exceeding one year.
- Long-term sources — sources providing funds for a period exceeding five years.
- Fixed charge funds — funds carrying a fixed, compulsory return (interest/dividend), e.g. debentures and preference shares.
- Charge on assets — a claim/security created over a firm's assets in favour of a lender.
- Restrictive conditions — terms and limitations imposed by a lender on the borrowing firm.
- Voting power — the right of equity shareholders to participate in the management of a company.
- Accounts receivable — amounts owed to a firm by its customers for credit sales.
- Bill discounting — selling/discounting a bill of exchange to get funds before its maturity.
- Factoring — a financial service in which a factor buys a firm's receivables, handles credit control and debt collection, and bears (or shares) bad-debt risk.
- GDRs (Global Depository Receipts) — dollar-denominated depository receipts issued abroad by an Indian company to raise foreign-currency funds, traded on a foreign stock exchange.
- ADRs (American Depository Receipts) — depository receipts issued in the USA, issued only to American citizens and traded on a US stock exchange. …