Difference between borrowed fund and owners …

Owner capital :

1. Meaning : Consist of the amount contributed by owners and their profit reinvested in business.
2. Permanent : It remains permanent invested.
3. Risk : It carries risk of business.
4. Control :Control rests with providers of owners capital.
5. Security : It does not require any asset as security.
6. reward : Reward is dividend.
7. Priority : Reward is paid after payment of interest on borrowed funds.
8. Nature of return : The rate of dividend may fluctuate year to year.

Borrowed capital :

1. Meaning : It includes funds available in the form of loans or credit
2. Permanent : It is not permanent source of investment.
3. Risk : The debts of company are secured.
4. Control : No control rests with providers of borrowed funds.
5. Security : It is backed by security of assets.
6. reward : Reward is interest.
7. Priority : Payment of interest gets priority over payment of dividend.
8. Nature of return : The rate of interest is fixed on funds.