Advantages of Government Company:

Disadvantages of Government Company:

On the basis ownership industries are classified into private sector, public sector, joint sector and cooperative sector.

(i)Private sector industries are owned and operated by individuals or a group of individuals.

(ii)The public sector industries are owned and operated by the government, such as Hindustan Aeronautics Limited and Steel Authority of India Limited.

(iii)Joint sector industries are owned and operated by the state and individuals or a group of individuals. Maruti Udyog Limited is an example of joint sector industry.

(iv)Co-operative sector industries are owned and operated by the producers or suppliers of raw materials, workers or both. Anand Milk Union Limited and Sudha Dairy are a success stories of a co-operative venture.

National Small Industries Corporation (NSIC) was set up in the year 1955 as the central government undertaking. ... NSIC provides equipment, plant, and machinery on a hire-purchase basis. Under its scheme, entrepreneurs can procure indigenous as well as imported machinery. NSIC (National Small Industries Corporation) is an ISO certified Indian Government Enterprise under Micro, Small and Medium Enterprises. National Small Industries Corporation is working to aid, foster and promote the growth of MSMEs (micro, small and medium enterprises) all across the country.

Following mail services are provided by the post and telegraph department:
(a)UPS (Under Postal Service) : Under it the post office provides a certificate of posting on the payment of prescribed fee.
(b)Registered Post: This facility ensures the sender of the mail that in case the mail is not delivered to the adressee, it comes back to the sender.
©Parcel Post : Under this facility, the parcels of specified size and weight can be sent across the country as well as outside the country on the payment of parcel charges.
(d)Speed Post : Under it, the post & telegraph department guarantees that all the internet mail reveived up to 5 p.m. at the specified post offices will be delivered within 24 hours and if it fails to do so, the extra fee changed will be refunded.

The functions of retailers are as follows :

1. Financing : Retailers provide goods to the consumers on credit basis. This increases the level of consumption and hence the standard of living.
2. Supplying market information : Since the retailer is in direct contact with the consumers, he provides information regarding their tastes, preferences and attitudes, etc. to the wholesaler. This information helps them in taking important marketing decisions.
3. Convenience in buying : Retailers provide goods to the consumers according to their requirements. Usually, they are situated near the residential areas and remain open for long hours.
4. Risk bearing : A retailer has to bear the risk if the change in style and fashion occurs when the goods are stored in large quantities in the warehouses.

Services provided by wholesalers are as follows:

1. Buying and assembling : The wholesaler buys the product from the manufacturer and collects the same at one place and supplies goods to the retailers according to their requirement.
2. Storage function : The wholesaler also performs the storage function. The goods are purchased by the wholesalers from the manufacturers and stored at warehouses in order to meet the demand of retailers. The wholesalers act as bridge between the production and consumption of goods.
3. Breaking the bulk : The wholesaler purchases goods from manufacturers in bulk and avails discounts. He sells goods in small quantities to the retailers which saves the retailers from maintaining large stocks.
4. Advertisement : A wholesaler undertakes advertising and sales promotion of the product which automatically result in the increase in sales.
5. Market information : Wholesalers inform the retailers about the introduction of new products in the market. He also gets feedback from the retailers about the needs and preferences of customers. He passes the information to the producer to make necessary changes in the products.
6. Risk bearing : The wholesalers have to maintain optimum levels of stock in their godowns to meet the demands of the retailer. The retailer’s risk of maintaining godowns, price fluctuations, etc., are
   reduced to a great level.

Internal Trade When buying and selling of goods and services takes place within the geographical limits of a country. It is known as internal trade.

Types of Internal Trade Internal trade can be classified into two categories.

(i) Wholesale Trade It refers to the trade in which goods are sold in large quantities. The person who carries on wholesale trade is known as wholesaler.

A wholesaler provides many valuable services to the manufacturer as well as the retailer.

(a) Services to Manufacturer

• Facilitating large scale production
• Bearing risk
• Financial assistance
• Expert advice
• Help in marketing function
• Facilitate production continuity
• Storage

(b) Services to Retailer

• Availability of goods
• Marketing support
• Grant of credit
• Specialised knowledge
• Risk sharing

(ii) Retail Trade Retail trade refers to sale of goods in small lots to the final consumers. A retailer buys goods from a wholesaler and sells them to the consumer.

(a) Services to Consumers

• Ready or quick supply
• Wide variety
• Guiding consumers
• Demonstration and after sale services
• Home delivery
• Convenient location
• Credit facility

(b) Services to Wholesaler and Manufacturer

• Ready market
• Providing information
• Risk bearing
• Distribution of goods to distant places

The subarctic is an area of the Northern Hemisphere that lies just south of the Arctic Circle. The taiga lies between the tundra to the north and temperate forests to the south. In Russia, the world's largest taiga stretches about 5,800 kilometers (3,600 miles), from the Pacific Ocean to the Ural Mountains.

As a finance manager of the company, I would advice the directors to issue the preference shares as by issuing preference shares, a company is benefited in the following ways.

1. Lifetime retention - A company need is not bound to repay the preference share capital amount during its lifetime.

2. No charge on company's assets - The preference shareholders have no right on the assets of the concerned company. So in this manner, they have no right to claim any amount (by selling-off company's assets) in case the company fails to make dividend payments.

3. No obligation - In case, the company incurs losses, then it is not required to pay dividend to its preference shareholders. 

On the other hand, debentures will not be chosen because of the following demerits of debentures.

1. ​ The legal boundation of a company to pay interest on debentures increases its payment obligations .
2. The borrowing capacity of a company gets limited with further issue of debentures.

following are the two sources of finance that an established company can opt to expand its production capacity-
- Issue of shares- the company can issue share (equity and preference) as per its requirement in order to finance its expansion project. company has to pay an annual dividend on these shares. the decision regarding providing dividend is totally in the hands of management.

- issue of debentures- another source through which a company can finance its project is Debentures, it is th fixed charge liability against which company has to pay interest on regular intervals. debenture may be issued for short term and long term period but practically it is issued for a long term period.

other sources are loan from banks, loans from financial institutions etc
 

Merits are as :
1. Financial institutions provide long-term finance, which are not provided by commercial banks.
2. Obtaining loan from financial institutions increases the goodwill of the borrowing company in the capital market. Consequently, such a company can raise funds easily from other sources as well.

3. Besides providing funds, many of the institutions provide financial, managerial and technical advice and consultancy to business firms.

4. As repayment of loan can be made in easy installments, it does not prove to be much of a burden on the business; and

5. The funds are made available even during the periods of depression, when other sources of finance are not available.

Limitations are :

1. Financial institutions are follows rigid criteria for grant of loans. Too many formalities make the procedure time-consuming and expensive.

2. Certain restrictions such as restriction on dividend payment are imposed on the powers of the borrowing company by the financial institutions.

3. Financial institutions may have their nominees on the Board of Director’s of the borrowing company there by restricting the powers of the company.

Merits are as :

1. Financial institutions provide long-term finance, which are not provided by commercial banks.

2. Obtaining loan from financial institutions increases the goodwill of the borrowing company in the capital market. Consequently, such a company can raise funds easily from other sources as well.

3. Besides providing funds, many of the institutions provide financial, managerial and technical advice and consultancy to business firms.

4. As repayment of loan can be made in easy installments, it does not prove to be much of a burden on the business; and

5. The funds are made available even during the periods of depression, when other sources of finance are not available.

Limitations are :

1. Financial institutions are follows rigid criteria for grant of loans. Too many formalities make the procedure time-consuming and expensive.

2. Certain restrictions such as restriction on dividend payment are imposed on the powers of the borrowing company by the financial institutions.

3. Financial institutions may have their nominees on the Board of Director’s of the borrowing company there by restricting the powers of the company.

Retained Profits: For any company, the amount of earnings retained within the business has a direct impact on the amount of dividends. Profit re-invested as retained earnings is profit that could have been paid as a dividend. The management of many companies believes that retained earnings are funds which do not cost anything, although this is not true. However, it is true that the use of retained earnings as a source of funds does not lead to a payment of cash. The dividend policy of the company is in practice determined by the directors. From their standpoint, retained earnings are an attractive source of finance because investment projects can be undertaken without involving either the shareholders or any outsiders. The use of retained earnings as opposed to new shares or debentures avoids issue costs. The use of retained earnings avoids the possibility of a change in control resulting from an issue of new shares. Another factor that may be of importance is the financial and taxation position of the company’s shareholders. For example, because of taxation considerations, they would rather make a capital profit (which will only be taxed when shares are sold) than receive current income, and then finance through retained earnings would be preferred to other methods.

Advantages of Retained Earnings

• The management of many companies believe that retained earnings are funds which do not cost anything, although this is not true. However, it is true that the use of retained earnings as a source of funds does not lead to a payment of cash.
• The dividend policy of the company is in practice determined by the directors. From their standpoint, retained earnings are an attractive source of finance because investment projects can be undertaken without involving either the shareholders or any outsiders.
• The use of retained earnings as opposed to new shares or debentures avoids issue costs. The use of retained earnings avoids the possibility of a change in control resulting from an issue of new shares.
• Another factor that may be of importance is the financial and taxation position of the company’s shareholders. If, for example, because of taxation considerations, they would rather make a capital profit (which will only be taxed when shares are sold) than receive current income, then finance through retained earnings would be preferred to other methods.

Disadvantages of Retained Earnings

• A company must restrict its self-financing through retained profits because shareholders should be paid a reasonable dividend, in line with realistic expectations, even if the directors would rather keep the funds for re-investing.
• At the same time, a company that is looking for extra funds will not be expected by investors (such as banks) to pay generous dividends, nor over-generous salaries to owner-directors.
• Scope of retained earnings is limited by amount of profits. A loss incurring firm has no source called retained earnings.

Retained Profits: For any company, the amount of earnings retained within the business has a direct impact on the amount of dividends. Profit re-invested as retained earnings is profit that could have been paid as a dividend. The management of many companies believes that retained earnings are funds which do not cost anything, although this is not true. However, it is true that the use of retained earnings as a source of funds does not lead to a payment of cash. The dividend policy of the company is in practice determined by the directors. From their standpoint, retained earnings are an attractive source of finance because investment projects can be undertaken without involving either the shareholders or any outsiders. The use of retained earnings as opposed to new shares or debentures avoids issue costs. The use of retained earnings avoids the possibility of a change in control resulting from an issue of new shares. Another factor that may be of importance is the financial and taxation position of the company’s shareholders. For example, because of taxation considerations, they would rather make a capital profit (which will only be taxed when shares are sold) than receive current income, and then finance through retained earnings would be preferred to other methods.

Advantages of Retained Earnings

• The management of many companies believe that retained earnings are funds which do not cost anything, although this is not true. However, it is true that the use of retained earnings as a source of funds does not lead to a payment of cash.
• The dividend policy of the company is in practice determined by the directors. From their standpoint, retained earnings are an attractive source of finance because investment projects can be undertaken without involving either the shareholders or any outsiders.
• The use of retained earnings as opposed to new shares or debentures avoids issue costs. The use of retained earnings avoids the possibility of a change in control resulting from an issue of new shares.

• Another factor that may be of importance is the financial and taxation position of the company’s shareholders. If, for example, because of taxation considerations, they would rather make a capital profit (which will only be taxed when shares are sold) than receive current income, then finance through retained earnings would be preferred to other methods.

Disadvantages of Retained Earnings

• A company must restrict its self-financing through retained profits because shareholders should be paid a reasonable dividend, in line with realistic expectations, even if the directors would rather keep the funds for re-investing.
• At the same time, a company that is looking for extra funds will not be expected by investors (such as banks) to pay generous dividends, nor over-generous salaries to owner-directors.
• Scope of retained earnings is limited by amount of profits. A loss incurring firm has no source called retained earnings.

A n s w e r: Various sources of long term funds include are as follows: Equity shares, preference shares, debentures, retained earnings, loans from financial institutions, loans from commercial banks etc.

The main functions of banks can be study under two broad categories :

(a) Primary functions.
(b) Secondary functions or subsidiary functions.

Primary functions :

1. Acceptance of Deposits : Accepting of deposits from the public is the most important function of bank. It takes the savings and surplus of people. Banks provide a safe custody of the deposited cash. Depositors can easily transfer money and can make the payments through cheques.
Banks provide an attractive rate of interest on their deposits. There are various types of deposits which can be opened in the bank like Fixed Deposit. Savings Deposit and Current Deposit.

2. Making Loans and Advances : It is another equally important functions of bank. Banks accept surplus money of people and provide loans and advances to the needy persons. It is through loans and advances, banks earn profit. Loans and advances are provided through banks in the following forms :
(i) Loan, (ii) Overdraft, (iii) Cash credit, (iv) Discounting of bills and exchange.

(i) Loan : Loan is a lumpsum advance made by a bank against security or otherwise. In it specified amount is either paid to the customer in cash or is credited in his account. The borrower is required to pay a prefixed rate of interest on the amount of loan from the date of the sanction of the loan.
The loan may be refunded in instalment or in lumpsum. Short and medium term loans are provided by commercial banks.

(ii) Overdraft: Under this system a current account holder is allowed to overdraw his bank account i.e., he can draw upto a fixed limit more than the balance in his account withdrawal at any time.

(iii) Cash-credit: In cash credit, a customer is given credit upto a definite limit against a surety bond or against other securities. The interest is charged on the amount overdrawn by customer on the daily balance and not on the entire amount of the limit.

(iv) Discounting of Bills of Exchange : Bill of Exchange is a negotiable instrument. It is drawn by the seller and is accepted by the buyer. The drawer has got a facility to discount the bill of exchange before maturity if money is required immediately. The bank discounts the bill and deducts a certain amount as discounting charges and pays the remaining money to the drawer.

Secondary functions subsidiary functions can be classified as :

(a) Agency functions
(b) Utility functions.

(a) Agency functions : These are the functions which banks perform as an agent of their customers.

1. Collection of cheques and bills : It collects local and outstation cheques, drafts, bills of exchange, and promissory notes of its customers and credit to their account.

2. Collection of Interest and Dividend : It also collects interest and dividend on debentures and securities held by its customers.

3. Purchase and sale of securities : On instructions from its customers banks purchase or sell stock securities, debentures, bonds etc.

(b) Utility functions : Banks provide the following utility or miscellaneous functions :

1. Safe custody of customers' valuable articles and securities : Some banks provide the facilities of lockers where on nominal rent a customer can keep its valuable articles such as ornaments, jewellery etc.

2. Facility of Foreign Exchange : After obtaining a license from the Reserve Bank of India, commercial banks can deal in foreign exchange. The banks can exchange the various foreign currencies and even discount foreign bills of exchange.

3. Provide Trade Informations : Banks provide useful trade information to its customer through publishing various journals.

The import trade is referred to goods and services purchased into one nation from another. The word “import” originates from the word “port” considering the fact that the products are frequently transported via ship to foreign countries. 

Example : Person A of India imported hi tech machine from Japan

The given case is Import trade. Japan's good is coming to India