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1856177890

1856177890

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Published by imatache
CIMA
CIMA

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Categories:Types, Business/Law
Published by: imatache on Dec 01, 2010
Copyright:Attribution Non-commercial

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12/04/2012

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Sources of finance are frequently discussed under two broad headings: equity and debt.
Equity is the risk, and permanent, capital of an entity. In balance sheet terms it is repre-
sented by ordinary share capital and reserves. The difference between book values, market
values, and nominal values of equity needs to be fully understood. Bank borrowing has
historically been the most popular form of debt to be raised. Preference shares are a hybrid
between debt and equity and account for a small proportion of corporate finance.

The ability to match sources of finance to an entity’s requirements and circumstances is
required for this examination. Sources of capital also need to be discussed in relation to the use
to which that finance will be put and the duration of the investment. Matching the maturity of
the investment to the maturity of the finance is often considered to be the preferred approach.

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