SOURCE OF BUSINESS FINANCE

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                                         SOURCE OF BUSINESS FINANCE

                  Introduction:    It provides an overview of the blog different sources of money can also be bought to start running a business. It also discusses the advantages of various sources and factors that determine one's a suitable source of trade finance. This is important for anyone who wants to start a business to know about different sources where money can be raised. It this also important to know relative properties and sources so that choice of a suitable source can be made

                               MEANING AND IMPORTANCE OF SOURCE OF BUSINESS FINANCE:  Essential finance for businesses to set up and run their operations is known as business finance. No business can function without sufficient funds to undertake various undertakings activities. Money is required for the purchase of fixed assets (fixed capital) requirements, to run day-to-day operations (working capital requirement), and to undertake growth and expansion plans in a business organization.

CLASSIFICATION OF SOURCES OF FUNDS: Various sources of funds available for a business can be classified according to three major bases, which are:

(i)                   Time period (long, medium, and short term),

(ii)                  Ownership (owner's fund.)and borrowed funds, and

(iii)                The source of production (internal sources and external sources).

 LONG, MEDIUM AND SHORT-TERM SOURCES OF FINANCE: Sources that provide funds for a period of more than 5 years are called long-term sources. A source that meets the financial requirements for a period exceeding one year but not more than 5 years are called medium-term sources and those sources which the provision of funds for a period of more than one year is called short terms source.

OWNER'S FUNDS AND BORROWED FUNDS: Owner's funds refer to the fund which is provided by the owners of an enterprise. Borrowed capital, on the other hand, refers to money that is generated by way of loan or borrowing from another person or institution.

INTERNAL AND EXTERNAL SOURCES: The internal sources of capital are generated within the business, such as through the retained profits. On the other hand, external sources of capital are those which are arranged from outside such as finance provided by suppliers, lenders, and investors.

SOURCES OF BUSINESS FINANCE: Sources of money available for business includes retained earnings, business credit, factoring, lease financing, public deposits, commercial paper, and the issue of shares and debentures commercial banks, financial institutions, and international sources of finance.

RETAINED INCOME: This is part of the company's net income. Earnings not distributed as dividends are known as retained earnings. An amount of available retained earnings depend on the company's dividend policy. This is usually used for the growth and expansion of the company.

Trade Credit: Credit given by one trader to another for purchasing goods or services are known as trade credit.  Trade credits provide a business loan purchase facility supplied on credit. Business loan terms vary by industry to industry.

FACTORING: Factoring has emerged as a popular source of short-term funds in India in recent years. It is a financial service whereby the factor is responsible for all providing credit control and debt recovery from the buyer and protection against any bad credit loss to the firm. There are two methods of factoring- recourse and non-recourse factoring.

LEASE FINANCING: A lease is a contractual agreement under which the owner of the property (the lessee) gives the other party (the lessor) the right to use the property. The lessee makes periodic payments to let the property outside for some specified period, the term is called the lease rent.

PUBLIC DEPOSIT: A company can raise money by inviting the public to make a deposit.  The deposit can take care of both longtime and short-term financial needs of the business. The interest rate on deposits is generally higher than what is offered by banks and other financial institutions.

COMMERCIAL PAPER (CP): It is an unsecured promissory note issued by a firm that usually ranges from 90 days to 364 days. Being unsecured, only those firms which have good credit ratings can issue CP and its regulation comes under the Reserve Bank of India.

ISSUANCE OF EQUITY SHARES: Equity Shares represent the owned capital of the company. Because of their fluctuating earnings, equity shareholders are called Company's risk carriers. These shareholders enjoy high returns from the company during the prosperity period. They have voting rights in the management of the company

ISSUE OF PREFERENCE SHARES: These confer a preferential right to the share shareholders in respect of payment of income and repayment of Capital. Investors who prefer stable income without taking on high risk prefer these stocks. A company can issue different types of preference shares.

ISSUANCE OF DEBENTURES: Debentures represent the debt capital of a company and the holders of the debentures are the creditors. These are fixed-charged funds which has a fixed interest rate. Issuance of debentures is suitable when the company's sales and earnings are relatively stable.

COMMERCIAL BANKS: Banks provide short and medium-term loans to firms in every size. The loan is repaid either in a lump sum or in installments. The interest charged by the bank depends on factors including characteristics of the borrowing firm and the level of interest rates in the economy.

FINANCIAL INSTITUTIONS: Established by both Central and State Governments. Many financial institutions across the country to provide industrial finance to companies engaged in the business.  This is also called the development Bank. This source of financing is considered suitable when there are large funds it is necessary for the expansion, restructuring, and modernization of the enterprise.

INTERNATIONAL FINANCING: With the liberalization and globalization of the economy, Indian companies have started raising funds from international markets. International sources from which funding can be obtained include foreign currency (FCNR) loans from commercial banks. Financial assistance provided by international agencies and development banks, and issuance of financial instruments in International Capital Markets (GDR/ADR/FCCB).

FACTORS INFLUENCING CHOICE: Effective evaluation of various sources should be established by the business to achieve its main objectives. Choose the source of business finance depends upon factors like cost, financial soundness, risk profile, tax benefits and flexibility to receive funds. Need these factors the analysis should be done simultaneously while taking the decision for the choice of suitable Source.

                             In this blog, I explained in detail all aspects of the source of business finance.

This is useful for the civil service aspirants and all other higher secondary students also. If anything is missed in this may be a  comment in the comment box. I wish all my readers once again. My HAPPY CHRISTMAS to all my valued readers…thank you

CHINESE REVOLUTION

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                                           CHINESE REVOLUTION

 THE PEOPLES REPUBLIC OF CHINA The  People's Republic of China (PRC) was founded on October 1, 1949. However, a test of Chinese communism cannot begin. It must have started about 30 years earlier because the previous years formed the PRC as a Communist state. Chinese Communism had a remarkable continuation of leadership. Mao Zedong (W-G: Mao tse-Tung, 1893-1976) and his colleagues were members of the group in the 1920s. Mao was instrumental in establishing the first Chinese Communist Party in 1928-34. He stopped developing and developing a military and political strategy in the Yenan years 1935-45 that won the 1949 civil war. Tan continued to form Communist China and ruled it - in his last years at least in the name - until then. his death in September 1976.

              

Mao tse-Tung

 In the 20th century, China saw a revolution in foreign domination and sovereignty. The power of European colonies as well the United States adopted policies in China, which were different from its own used in colonies in other parts of the world. Their policies are OPIUM TRADE and OPEN DOOR policy.

OPIUM TRADE Chinese silk, tea, and pottery were in great demand everywhere in Europe. China made huge profits from exports things. There was nothing that could be imported into China from Europe. So the European traders were at a huge loss. As a result of this loss, British traders imported opium, an intoxicating substance in China. This has affected Chinese trade and its exploitation the Chinese people are not mentally balanced. It resulted in the economy and the psychological humiliation of the Chinese.

         OPEN DOOR POLICY At the end of the nineteenth century, several European countries acquired trading rights in China. America could not find the right as it did not care about China at the time. To get this right, John Hey, then-Secretary of State at that time USA has announced 'open door policy. According to this policy, America fought for equal rights and opportunities for all countries Chinese market. China was divided into different regions to be controlled by various countries. The main aim of the policy was to get an opportunity to USA to interfere with China 

    BOXER REBELLION The Manchu dynasty in China prefers foreign intervention and domination. Some secret societies in China rebelled it in 1900. The symbol of these organizations was Boxer's fist.So this is known as the Boxer Rebellion. Although this rebellion was a failure, triggered changes that later emerged. In 1911, another change took place under the leadership of Dr Sun Yat-Sen. against the Manchu Dynasty . This ended the monarchy in China. After the revolution, the Kuomintang group founded the government of the Republic of South China under the leadership of Sun Yat-Sen.  He emphasized the importance of ideas such as nationalism, democracy, and socialism

  IDEOLOGIES OF SUN YAT SEN 

Nationalism - To expel the Manchu dynasty and the imperial powers

SUN YAT SEN 

 Democracy - To establish democratic rule, Socialism      - To control capital and distribute land equally.

         He wanted to maintain equality with western countries. At same time he decided to break the unjust agreements reached with the countries also . The Republic of Kuomintang welcomes the progress of the and industry. China received assistance from Russia in various fields and the Communist Party of China was formed.  Later the Kuomintang and the communists allied themselves. But the alliance was disrupted when Chiang Kai Shek became the head of the republic following the death of the Sun.

                Chiang Kai-shek traces military autocracy in China. He gave Opportunity for foreign powers, including the US, to intervene free in China and did not cooperate with the communists. Coal and iron Industry, banking and foreign trade were all controlled by foreign countries. Communists opposed    Chiang Kai-shek policy. They were brutally repressed. Mao Zedong at that time reached the leadership of the Communist Party. In 1934, Under the leadership of Mao Zedong, the journey started from Qiangsi of South China. The adventure trip ends in Yan'an of Northwest China. During the journey, he confiscated agricultural land and distributed it from the lords to the villages and among the farmers. This journey is about 12000 kms. Hence it is known as 'Long'March'. So Mao Zedong and the Communist Party became

https://cpim.org/content/lessons-chinese-revolution

   Chiang Kai-shek 

Symbol of the struggle of the Chinese against a foreign power. Chiang Kai-shek had to seek political asylum in Taiwan when the Red Army Mao Zedong captured the center of Kuomintang rule. China on 1 October 1949, the People's Republic of China became Mao Zedong's leadership. The Revolution of 1911 was a major victory because it overthrew the Qing Empire, overthrew China for more than 2,000 years and led to the establishment of the Republic of China. The 1911 Revolution liberated the minds of the Chinese people.9867

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