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Finance Project 1

Finance Project 1

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Published by Prabhpreet Singh
project report on finance
project report on finance

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Published by: Prabhpreet Singh on Sep 08, 2010
Copyright:Attribution Non-commercial

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06/20/2011

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TABLE OF CONTENT
S. No.
TopicPage no.
1Task 1: Introduction to Sources of Finance withAdvantages and Disadvantages
22
Task:2 Cost of Finance
83
Importance of Finance in Financial Planning
94
Impact of Financing on Financial statements
105
Task 3: Viability of Financial Decision
116
Task 4: Projected Profit and Loss account for fiveyears
127Conclusion138References14
[1]
 
INTRODUCTION
In our present day economy, finance is defined as the provision of money at the timewhen it is required. Every enterprise, whether big, medium or small, needs financeto carry on its operations and to achieve its targets. In fact, finance is soindepensible today that it is rightly said that it is the life blood of an enterprise.The various sources of finance can be long term and short term.
SOURCES OF FINANCEA. LONG TERM FINANCE
A business requires funds to purchase fixed assets like land and building, plant andmachinery, furniture etc. The capital required for these assets is called
fixed capital
.A part of the working capital is also of a permanent nature. Funds required for this part of working capital and for fixed capital is called long term finance.
(A) EQUITY SHARES
Equity shares are shares which do not enjoy any preferential right in the matter of  payment of dividend or repayment of capital. The equity shareholder gets dividendonly after the payment of dividends to the preference shares. There is no fixed rateof dividend for equity shareholders. The rate of dividend depends upon the surplus profits. In case of winding up of a company, the equity share capital is refundedonly after refunding the preference share capital.
MERITS(A)To the Shareholders
1.In case there are good profits, the company pays dividend to the equityshareholders at a higher rate.[2]
 
2.The value of equity shares goes up in the stock market with the increase in profits of the concern.3.Equity shareholders have greater say in the management of a company asthey are conferred voting rights by the Articles of Association
(B)To the Management:
1.A company can raise fixed capital by issuing equity shares without creatingany charge on its fixed assets.2.The capital raised by issuing equity shares is not required to be paid back during the life time of the company.3.There is no liability on the company regarding payment of dividend onequity shares.
DEMERITS(A)To the shareholders
1.Equity share-holders get dividend only when the company is earningsufficient profits and the Board of Directors declare dividend2. Equity shareholders bear a very high degree of risk. In case of losses they donot get dividend. In case of winding up of a company, they are the very lastto get refund of the money invested. 
B)To the Management
1.As the equity shareholders carry voting rights, groups are formed to corner the votes and grab the control of the company. There develops conflict of interests which is harmful for the smooth functioning of a company.[3]

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