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c. Chit Funds: Chit fund is a kind of customary source of finance. In this few members form into a
club or committee or party or association. Each member contribute a monthly deposit. If
someone is in sudden need of money they can claim the chit. This premature en-cashing of the
deposited amount will act as a personal finance source.

d. Deposits from Dealers: The enterprise can collect security deposits from the dealers selected.
The security deposit collected depends on the credibility, reputation and goodwill of the
enterprise. This security deposit collected becomes a short term source of financing. However,
this source is applicable only for businesses which need dealers or distributors.

Differences between Equity Shares and Preference Shares

The following are the differences between Equity Shares and Preference Shares

Equity Shares Preference Shares

The company is under no obligation to pay the The preference shareholders gets priority over the payment of the
dividend to the equity shareholders. dividend at a fixed rate before any dividend is paid to the equity
shareholders.

The company is under no obligation to pay the The preference shareholders gets priority to recover the capital invested
principal amount to the equity share holders. in case the company is winding up.

Rate of dividend varies based on profits earned Rate of dividend is fixed.
by the company.

The arrears of dividend can not be accumulated. They have the option to accumulate or not to accumulate the dividend.

They have right to participate in management. The preference shares have the option either to participate or not to
participate.

Equity shares can never be converted. Preference shares have the option to either get converted or to stay not
converted.

Equity shareholders are the true risk bearers. Risk is very low as compared to the equity shareholders.

The following are the differences between Owner’s fund and Borrower’s fund