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Fixed and Working Capital
Nature of Business Finance
includes all types of capital or funds used in business
needed in all types and sizes of businesses
wide term
involves not only the estimation of the amount of funds but also the
sources of finance, investment of funds raised, management of cash
disposal of earnings and control of funds
amount required differs from one business to another depending upon its
nature and size
availability of finance determines the scale of operations of business
Importance of Finance for Business
the firm can meet its liabilities in time
prompt payment of debts —> raises credit standing
therefore, the firm can borrow funds as and when necessary
firm can take advantage of opportunities
firm can carry on its business smoothly without any interruptions
firm can replace its plant and machinery in time
this improves efficiency
firm can face recession, trade cycles and other crises more easily
purchase of fixed and current assets
Fixed and Working Capital 1
, helps bridge the gap between production and sales
timely payment of wages and salaries
helps attract, retain and motivate talent
sound financial position enables an enterprise to enjoy good will or reputation
in the business world
Sources of Finance for Different Types of
Business Firms
Capital for Sole Proprietorship Business
operates at a small scale
requires a limited amount of capital
proprietor —> brings his own capital
loans can be raised from friends and family
money can be borrowed from banks and financial institutions
short terms loans can be obtained from commercial banks
long terms loans (for the purchase of fixed assets) are available from State
Financial Corporations and other financial institutions
central and state government provide special financial assistance to small
scale units to encourage entrepreneurship and self employment
Capital for Partnership Firm
bigger than that of a sole proprietorship
owned capital is contributed by the partners in an agreed ratio
retained profits credited to the accounts of partners also constitute a part of
owned capital
loans can be raised from commercial banks and financial institutions
machinery and equipment can be bought on instalment/ hire purchase basis
Fixed and Working Capital 2
Fixed and Working Capital
Nature of Business Finance
includes all types of capital or funds used in business
needed in all types and sizes of businesses
wide term
involves not only the estimation of the amount of funds but also the
sources of finance, investment of funds raised, management of cash
disposal of earnings and control of funds
amount required differs from one business to another depending upon its
nature and size
availability of finance determines the scale of operations of business
Importance of Finance for Business
the firm can meet its liabilities in time
prompt payment of debts —> raises credit standing
therefore, the firm can borrow funds as and when necessary
firm can take advantage of opportunities
firm can carry on its business smoothly without any interruptions
firm can replace its plant and machinery in time
this improves efficiency
firm can face recession, trade cycles and other crises more easily
purchase of fixed and current assets
Fixed and Working Capital 1
, helps bridge the gap between production and sales
timely payment of wages and salaries
helps attract, retain and motivate talent
sound financial position enables an enterprise to enjoy good will or reputation
in the business world
Sources of Finance for Different Types of
Business Firms
Capital for Sole Proprietorship Business
operates at a small scale
requires a limited amount of capital
proprietor —> brings his own capital
loans can be raised from friends and family
money can be borrowed from banks and financial institutions
short terms loans can be obtained from commercial banks
long terms loans (for the purchase of fixed assets) are available from State
Financial Corporations and other financial institutions
central and state government provide special financial assistance to small
scale units to encourage entrepreneurship and self employment
Capital for Partnership Firm
bigger than that of a sole proprietorship
owned capital is contributed by the partners in an agreed ratio
retained profits credited to the accounts of partners also constitute a part of
owned capital
loans can be raised from commercial banks and financial institutions
machinery and equipment can be bought on instalment/ hire purchase basis
Fixed and Working Capital 2
