Future Billionaires
125-Vishu Gupta(B)
165-Ramandeep Kaur(C)
INTRODUCTION TO FINANCE (125) (VISHU GUPTA)
Finance is the study of funds and management. Its general areas are business finance, personal finance, and public finance. It also deals with the concepts of time, money, risk, and the interrelation between the given factors.
The subject of finance has been traditionally classified into two classes:
(i) Public finance
(ii) Private finance
DEFINITIONS OF FINANCE
“Business finance deals primarily with raising, administering and disburing funds by privately owned business units, operating in non-financial fields of industry”
By: Prather and Wert
DISCUSSION (165)(RAMANDEEP KAUR)(FATHER NAME-JASWINDER SINGH)
SOURCES OF FINANCE
Preference shares
Preference shares have a fixed percentage dividend before any dividend is paid to the ordinary shareholders. As with ordinary shares a preference dividend can only be paid if sufficient distributable profits are available, although with 'cumulative' preference shares the right to an unpaid dividend is carried forward to later years.
Retained earnings
For any company, the amount of earnings retained within the business has a direct impact on the amount of dividends.
Bank lending
Borrowings from banks are an important source of finance to companies. Bank lending is still mainly short term, although medium-term lending is quite common these days.
Short term lending may be in the form of:
a) an overdraft, which a company should keep within a limit set by the bank. Interest is charged (at a variable rate) on the amount by which the company is overdrawn from day to day;
b) a short-term loan, for up to three years.
Venture capital
Venture capital is money put into an enterprise which may all be lost if the enterprise fails. A businessman starting up a new business will invest venture capital of his own, but he will probably need extra funding from a source other than his own pocket.
ADVANTAGES & DISADVANTAGES OF DIFFERENT SOURCES OF FINANCE
Benefits
Some sources of finance offer special benefits. Internal sources of finance keep control within the company and don't subject you to interest payments on loans. Finally, no ownership capital is a vote of confidence from the investor or agency that issues a loan or grant. Grants are especially valuable because they don't require repayment, and might be available on a recurring basis.
Drawbacks
Each source of finance also has its own limitations. Ownership capital makes you responsible to a group of shareholders who have partial ownership rights. Loans cost interest, which the lender will demand back on schedule whether you've turned a profit or not.
Effects
The methods you use to secure finance for your business can directly affect how your business grows and operates.
CONCLUSION
Modling and computation of dynamic optimization problems in finance is an important area for research in financial modeling.The thrust of this research has been to develop computational methods in order to solve financial optimal control models which are difficult to solve by traditional analysis using optimal control theories.Hence we conclude that there are so many things in the finance that are not easy to understand and so many computational methods..
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