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1. Equity shares: The company issues shares to the public and provide the equity shares to them.
The equity share holders become the virtual owners of the company. The company will however
will be under no obligation to pay the equity share holders the principal amount or dividend.

2. Preference shares: These shares will have a priority regarding

 the payment of dividend at a fixed rate before paying the dividend to the equity share
holders.

 the return of the capital in case the company is wound up.

State the shares preferred by the organizations when it comes to tax benefits. Is it debentures or the
preference shares:

The companies prefer debentures as it yields tax benefit to them. When debentures are issued, the
company is liable to pay interest on the amount borrowed under debentures. This interest can be
claimed under tax deduction as it fall under tax deductible expense. So, the companies prefer the
debentures.

Definition of personal financing.

Personal financing refers to the initial investment capital arranged by the entrepreneur himself/herself.
Entrepreneurs use either their personal cash or they convert their assets into cash and use it.

Sources of personal finance

Entrepreneurs use their personal resources for making the initial investment in the enterprise. They also
use other options like their private assets, cash from the members of the family, near and dear relatives
and friends. The friends and relatives who helped in the investment may not have any legal hold on the
business. They remain as silent partners and extend their informal assistance.

All these sources of personal finance may be classified as below:

a. Personal Savings: Entrepreneurs usually invest their own personal savings as these are readily
available and also as they do not have to undergo any liability. The savings could be small or
large and become as internal sources. These can easily meet small, short term requirements.

b. Friends and Relatives: Entrepreneurs can also procure finance from

 Friends

 Relatives

 Other acquaintances

This form of procurement is informal but one of the popular.