sources of capital

SOURCES OF CAPITAL

Presented By :- Kiran Kumar (PGDM 1st sem)

• "Capital is a necessary factor of production and, like any other factor, it has a cost,"

- Eugene F. Brigham

• "Firms with the most profitable investment opportunities are willing and able to pay the most for capital, so they tend to attract it away from inefficient firms or from those whose products are not in demand,"

- Brigham

• Capital is the money or wealth needed to produce goods and services. In the most basic terms, it is money. All businesses must have capital in order to purchase assets and maintain their operations.

Definition of capital

NEED OF CAPITAL IN BUSINESS

TYPES OF BUSINESS ORGANISATION

7. Limited l iabi l i ty partnership8. One person company (2013

Act)

∗ Internally generated funds are most frequently employed; sources include:1) profit2) sale of assets and little-used assets.3) working capital reduction4) accounts receivable.

∗ Short-term internal sources of funds:1) reducing short-term assets- inventory, cash , and other working-capital items.2) extended payment terms from suppliers.

INTERNAL OR ENTERNAL FUNDS

∗ Criteria for evaluating external sources of funds:

1) Length of time the funds are available.2) Costs involved.3) Amount of company control lost.

INTERNAL OR ENTERNAL FUNDS (cont.)

General sources of Capital

Equity:- Personal SourcesProfitsAngel Capital Venture Capital

Debt:- Financial InstitutionsCredit CardsOther (Home Equity Loan, Life Insurance)

Other:- Local Community Grants and LoansGovernment ProgramsOther (customer, suppliers)

Sources of capital based on category

EQUITY CAPITAL Vs DEBT CAPITAL

Personal Sources:-

Investing the capital from his/her own pocket or from there savings

Profits:-

The surplus remaining after total costs are deducted from total revenue are invested in the business.

Angel Capital:-

'Angel Investor' An investor who provides financial backing for small startups or

entrepreneurs. Angel investors are usually found among entrepreneur's family and friends. The capital they provide can be a one-time injection of seed money or ongoing support to carry the company through difficult times

Venture Capital:-

'Venture Capital' Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets

Equity

FORMULA FOR DEBT MANAGEMENT

Phases of capital Investment