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SAI INTERNATIONAL SCHOOL

CLASSS XI
SUBJECT: BUSINESS STUDIES

CHAPTER -7,

Sources of Business Finance
Topics: Equity shares, Features, Merits and demerits.

(LESSON NOTES-30)

SOURCES OF FINANCE

 A business can raise funds from various sources.
 Each of the sources has unique characteristics, which must be properly understood so that

the best available source of raising funds can be identified.
 There is not a single best source of funds for all organizations.

 Depending on the situation, purpose, cost and associated risk, a choice may be made

about the source to be used.
For example, if a business wants to raise funds for meeting fixed capital requirements, long term

funds may be required which can be raised in the form of owned funds or borrowed funds.
Similarly, if the purpose is to meet the day-to-day requirements of business, the short term

sources may be tapped. A brief description of various sources, along with their advantages and

limitations is given below.
Issue of Shares

 The capital obtained by issue of shares is known as share capital.
 The capital of a company is divided into small units called shares.

 Each share has its nominal value.
For example, a company can issue 1, 00,000 shares of Rs. 10 each for a total value of

Rs. 10, 00,000.

 The person holding the share is known as shareholder.
 There are two types of shares normally issued by a company.

 These are equity shares and preference shares.