Fundamentals of Finance

Fundamentals of Finance plays a very important role in the present market driven world. Starting from the process of production to distribution, the entrepreneur as well as the company needs finance.

The business enterprises as well as firms need finance to meet all of their short term, medium term and long term needs.

The long-term financial need is generally to make investment on the fixed assets such as plants, machines and buildings. The short term financial needs is generally for working capital management The medium term financial needs generally for a period of 1 year to 5 years.

Long-term sources of finance:

• Share capital or equity share
• Preference shares
• Retained earnings
• Debentures
• Bonds
• Loans from financial institutions
• Loan from state financial corporation
• Loans from commercial banks
• Venture capital funding
• Asset securitization
• International

Medium-term sources of finance:

• Preference shares
• Debentures
• Bonds
• Public deposits/fixed deposits for three years
• Loans from financial institutions
• Loan from state financial corporation
• Loans from commercial banks
• Lease financing / hire purchase financing
• External commercial borrowings
• Euro-issues
• Foreign currency bonds

Short term sources of finance:

• Trade credit
• Commercial banks
• Public deposits/fixed deposits for one years
• Advances received from customers
• Various short-term provisions