Health and Wealth Event

1619 Words7 Pages
Finance is important to a business, without it, an organisation would not be able to run effectively, eventually leading the organisation to fail. The are many reasons why Finance is important to an organisation and many factors in can be used for, i.e. investing and purchasing fixed assets like land and building, necessary equipment and expanding the business. Organisations that have a solid finance available to their business are able implement changes that want, which could help to bring in more money to the organisation and allowing them to last and survive. There are two types of finances, external sources or internal sources. Sources of Finance: External sources of finance are available sources of income that have come from…show more content…
Debentures holder has to paid interest regularly. They also get preference of being paid first in case of wind-up of the company. 3. Public Deposits Public also like to deposit their savings with a popular and well-established company which can pay interest periodically and payback the deposit when due. 4. Retained earnings The company may not distribute the whole of its profits among its shareholders. It may retain a part of the profits and utilize it as capital. The company may use its retailed earning as long-term investment i.e. expanding business, purchasing machinery, etc. 5. Term loans from banks As with short-term finance, banks are an important source of longer-term finance. Many industrial development banks, cooperative banks and commercial banks grant medium term loans for a period of three to five years. For businesses, using bank loans might be relatively easy but the cost of servicing the loan (paying the money and interest back) can be high. If interest rates rise then it can add to a businesses cost. Advantages: • You get regular income and fixed dividend coming in even if the company is making profit or not. • With this share, you do not have any interference in the management. • There is Flexible Capital structure in this share. Disadvantage: • In these shares, you are not eligible for extra dividend even if the Company make high profit. • At the time of liquidation, no
Open Document