1. CAPITAL Investment made by proprietor in his business
Money for carrying on any business
Cover all elements like money, land,
machinery, material etc.
Helps in buying factors of production,
machinery, tools, implements, buildings for
factories, raw material etc
Helps to pay wages to the labour force
employed

2. Types of Capital
Fixed capital
Working capital

3. Required for acquisition of
1. Fixed Capital
Required for acquisition of
fixed assets
Tools
Vehicles
Land
Building
Equipments,
furniture

4. Need of fixed capital
To finance the expenses for creation of organization
E.g. Lawyer's fees, filing fees, compansession paid to promotes for personal services

5. Sources of fixed capital
Shares
Debentures
Public Deposit
Term loan
Inter-company loan and investment
Foreign capital

6. 1.Shares
One of the method through which capital needed for company is collected
Generally issued while starting the company or organization or expanding business
Features –
Represents the ownership of the assets of the company
Shares are movable property & are transferable

7. Types of Shares Preference share Ordinary shares Deferred shares
Cumulative type
Non Cumulative type
Ordinary shares
Deferred shares

8. 2.Debentures
Carry a fixed rate of interest, payable after a fixed period
Debenture holders are only creditors, they don’t have control over the management of company.

9. Sr. no Shares / shareholders Debentures1
Form the capital of company
Do not form the capital of company, they form only credit money 2
Shareholders share profit and have no bear the losses
Debenture holders get fixed interest on their money, irrespective of loss /profit to the company 3
Share holders enjoy voting rights
Debentures holder do not enjoy voting rights 4
Share holder can exercise control over the management
Can not exercise control over the management 5
They are subjected to risk investment
Do not have any risk in investment, Repayment is guaranteed

10. Sr. no
Shares / shareholders
Debentures 6
Value of shares is generally small
Value of debenture is high 7
Share holders get share in profit
Do not get share from profit 8
Shareholders do not get back their money
Get back their money after the specific period

11. 3. Public Deposit
Company invites the general public to deposit their saving for some period at the specified rate of interest
Deposits are allowed to be withdrawn at the option of depositor on expiry of specific period

12. 4.Term loan
The money advances granted either by banks or by the financial institution like ICICI or financial investment companies like LIC
Generally to be repaid within 3 to 10 years
Secured to acquire the fixed assets, either to start the company or to modernize existing plants

13. 5. Intercompany loans & investment
Transfer of funds from one company to another or from one group of companies to another group of companies
6. Foreign capital
Funds from the joint venture partner
Capital may be received either in the form of patents or machines or funds against shares , debentures etc. from foreign partner

14. 2 . Working Capital
Required for day–to–day running of the organization
Funds are required to-
Purchasing raw materials, components, supplies, tools & spares
Incurring expenses for maintenance & service activities taxes & insurance
Meeting advertising, promotion, dispatching
Working assets vary from time to time & get converted into cash during operating cycle of business
Also called Circulating capital

15. Working capital cycle Cash Raw material Stock in process
Finished goods
Bills receivable

16. Sources of Working Capital
Source of generation of
long term capital
medium term capital
short term capital

17. Long term capital Internal source
Own funds(from saving, close friends)
Funds from earning, by taking share holders into confidence
Deferred taxation
External source
Share Capital
Ordinary shares
Preference share
Non share capital
loan

18. Medium term capital Internal source External source Retained profit
Equipment leasing
Hire purchase
Straight term loan
Other term loan

19. Short term capital Internal source External source Cash management
Trade credit
Credit sales
Bill finance
Trade bill
Bank bill
Bill credit
Factory
Invoice discounting

20. Budgets
Formal expression of the expected operation & results of a firm for defined future period
Financial statement showing in advance – how company or person or even country will spend money in next year
Without budget a business may aimless

21. Characteristics of Budget
It is written plan of action
Depicts the financial requirement of each dept.
Used for cost control purpose
May be treated as overall plan for business operations
Based on past experience or statistical data

22. Objectives of budgets
Must ensuring planning of targeted production or sales within the company
Ensure redundant expenditure
Most also recall policies of company
Provides basis for budgetary control
Budget must be flexible
Must focus specific areas, which need more efforts to work efficiently

23. Budgetary Control
Control used for the execution of budget is called budgetary control
Process of using the budget for controlling the finance, production, selling product activity
it is comparing of actual operations with the budget to determine if the plans are being carried out
Includes forecast of income & expenditures on equipment, machinery, manpower & material

24. Features of budgetary control
Well defined authority and responsibility for admin
Budget must involve around the key factor in business
Sound organization of the firm

25. Why budgetary control is important
Indicates plan in capital terms
Indicates planning in advance for different functions of business
Shows budgeted expenditure, which then compared with actual expenditure of respective department
Shows forecast of income & expenditure for budgeted period, for all resources.

26. Benefits of budgetary control
Help in deciding goals of the business & preparing plans to achieve these goal
Provides efficiency & eliminates waste
Ensure more economical use of firm’s resources
Aids in measurement of performance of each department
Acts a tool for management control