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 Procuring fixed assets
 To carry out research operations.
 To execute expansion or diversification plans.
Sources from where finance is procured: The various funds are:
 Owner’s fund: This is entrepreneur’s own fund such as equity, preference, margin/seed
capitals.
 Borrowed funds: Outside sources include:
 Issue debentures
 Loan from Banks
 Loan from financial institutes
 Loan from private lenders
 Again depending on the collateral security demanded by the lender the loans can be
secured or unsecured.

Equity: It refers to the capital invested in an enterprise by its owners.
Retained Profits: It is undistributed profits of the business or retained with the business.
Preference Shares: Those shares which are entitled to a priority in the payment of
dividend and repayment of capital.
Seed Capital: It is initial capital of the enterprise provided to an entrepreneur to prove the feasibility of
a project.
Start Up: Product development and initial marketing, but with no commercial sales yet funding to
actually get company operations started.

Define public financing.

Public Financing: The process of procuring the finance from the public, in the form of shares and
debentures is known as public financing.

How can we classify the debentures as sources of finance?

Debenture is document issued by a company under its seal to acknowledge the debt that need to be
paid pack after the completion of prescribed period. Debentures thus act as a source of raising long
term finance from outside.

Why is equity share capital is also termed as Risk Capital?

Equity shares are the ones that are not preference shares. The company does not bear any obligation to
pay them either principal amount or dividend and there by making the equity share holders the true risk
bearers. Due to this reason the equity share capital is also termed as risk capital from the equity
shareholder’s perspective.

The type of capital is used to procure the raw materials: