Unit 10 Sources of Finance

Unit 10 Sources of Finance - BFA103 Financial Accounting...

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Unformatted text preview: BFA103 Financial Accounting and Decision Making 2 nd Semester 2009 ___________________________________ School of Accounting & Corporate Governance School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making Unit 10 Sources of Finance ___________________________________ School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making Objectives: For students to be able to: Identify the main sources of finance available to a business; Explain the advantages and disadvantages of each; Distinguish between internal and external sources of finance; Distinguish between short-term and long-term sources of finance; ___________________________________ School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making Reference: Atrill, McLaney, Harvey & Jenner Chapter 14. Birt, et al Chapter 14. ___________________________________ School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making An understanding of the sources of finance includes examining whether the finance is internal or external to the business and also if it is of a long term or short term nature. ___________________________________ Figure 10.1 External Sources of Finance (Source: Atrill et al. 2006, p. 558) Total Finance Long-term Short-term Ordinary Shares Preference Shares Loans Debentures Leases Bank overdraft Debt Factoring Invoice Discounting School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making External Sources of Finance Long-term sources of finance Long-term sources of finance are defined as those sources of finance that are not due for repayment within one year ___________________________________ School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making External sources of finance are: Ordinary shares Preference shares Loans Leases ___________________________________ School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making Share capital The two main types of shares are: ordinary shares and preference shares. ___________________________________ School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making Ordinary shares Ordinary shares represent the risk capital of a company. They are the standard way companies divide and sell ownership rights ___________________________________ School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making Ordinary shares ; have limited liability for their owners ___________________________________ School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making Ordinary shares have no fixed rate of dividend ___________________________________ School of Accounting & Corporate Governance BFA103 Financial Accounting & Decision Making Ordinary shares will received proceeds from the winding up of the company only after all others have...
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Unit 10 Sources of Finance - BFA103 Financial Accounting...

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