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.

<th>SHARES</th> <th>DEBENTURES</th>

Share capital forms a part of the total capital of the company and shareholders are treated as owners of the company.	Debentures are defined as a debt of the company and debenture holders are creditors to the company.
Rate of Return
The dividend rate on shares fully depends upon the profits that are obtained by the company.	The interest rate on debentures is fixed at the beginning of the issue of the debentures.
Payment Condition
Shareholders are paid after the debenture holders are paid interest.	Debenture holders are paid the interest before the shareholders are paid.
Payment Obligation
Shareholders are paid dividend out of profits and if the company is in losses they don't get dividend.	Debenture holders are creditors and get interest compulsorily irrespective of the company makes a profit or not.
Winding up of Company
The shareholders of the company may lose a part or full of their capital when the company is wound up.	The company should pay back the investment of debenture holders invariably when the company is wound up.
Voting Rights
Shareholders are given right to attend and vote at the meetings of the shareholders conducted by the company.	Debenture holders do not have any right to vote in the company's meetings.
Risk Associated
Investment in shares of the company is considered as risky because shareholders are of residual interest in the company.	Debentures are considered as a good investment idea because it has a right to get the investment amount back.
Redeemable Nature
Shares are not redeemable except in the case of redeemable preference shares.	Debentures are redeemable after the completion of the maturity period.
Security
The shareholders have no security for the investment they made on shares.	Debentures are very well secured because the debenture holders have a charge on assets of the company.
Maturity Period
A shareholder of the Shares is not paid back by the company because shares have no maturity period.	Debenture holders have to be paid back at the end of a maturity period of the debenture.

Basis of Comparison	Goods	Services
Nature	Tangible	Intangible
Transfer of Ownership	Possible	Not Possible
Separable	Goods can be separated from the seller	Services cannot be separated from the service provider
Storage	Goods can be stored	Services cannot be stored
Perishable	Not all goods are perishable	Services are perishable
Production and Consumption	Goods have a significant time gap between production and consumption	Services are produced and consumed together

Sole proprietorship

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

BUSINESS ETHICS Refers to the moral values or standards or norms which govern the activities of a businessman. Ethics define what is right and what is wrong. By ethic we mean the business practices which are desirable from the point of view of Society. The purpose of business ethics is to guide the managers and employees in performing their job. Example of business ethics are charging fair price from customers, giving fair treatment to workers, earning reasonable profits and paying taxes tithe government honestly.

It is not compulsory for partnership firms to get themselves registered. However, it is beneficial to get themselves registered because an unregistered firm has to suffer the following consequences :
1.A partner of an unregistered firm cannot file a suit against any other partner or the firm for enforcing his legal rights.
2.An  unregistered firm cannot file a suit against any third party or partner for enforcing legal rights.
3. Any partner of an unregistered firm cannot claim a set off in a legal proceeding carried on against the firm by a third party for enforcing any legal right.
4. No salary or commission is provided to any of the partners.

Internal Trade :
Internal trade is done within the geographical boundaries of a country. As an example, trade done amongst the traders of Delhi, Mumbai, Chennai, Kanpur and Amritsar etc. is called Internal Trade.

Types of Internal Trade :

(i) Wholesale Trade : It involves purchase and sale of goods in wholesale quantities. Large quantities of goods purchased from manufacturer are sold in small quantities to various retailers.

(ii) Retail : It involves the sale of goods to consumers by the retailers. A retailer buys the goods from a wholesaler and sells them to customers in their required quantities. It is a link between a wholesaler and consumer. Different types of goods are available at a retailer shop so that a customer could buy the goods of his own choice.

Internal trade can also be classified as : (a) Local Trade, (b) State Trade, (c) Inter-State Trade.

 

External Trade : 
Whenever trade occurs between two countries, it is known as external trade. In foreign trade, both buyer and seller live in different countries. If Reliance Ltd. sells Polyester Yarn to a French firm or L&T Ltd. purchases a heavy machine from a Swiss firm, these would classified as external trade.

Types of External Trade :

1. Import Trade : When the trader of one country buys the goods from foreign countries, it is known as import trade for the trader who buys the goods.

2. Export Trade : When the trader of a country sells goods to a foreign country, it is known as export trade for the trade who sells the goods e.g., if a tea firm of Darjeeling sells tea to U.K., it is export trade.

3. Entrepot Trade : The goods imported from one country for export to another country, is known as entrepot trade. It is also known as Re-export. It is done when a country does not have her own seaport or not having good political relations with other countries or no direct access to those countries from where goods are to be imported.

Okay

Synthetic industry : In this industry, two or more materials are mixed together to create a new product. For example, producing soap, biscuits, etc.

It will not affect

 Perpetual Succession Company is a legal entity separate of its owners or members. It can be brought to an end only by law as it is created by the law. It will only cease to exist when a specific procedure for its closure, called winding up, is completed. Members may come and go, but the company continues to exist through consecutive succession of old members by new members on a continuous basis. We can say that ‘perpetual succession’ implies permanent existence which is not affected by death, retirement insolvency of members.

Company form of business organisation suffers from the following limitations : 1.Complexity in formation : The formation of a company is a very time consuming, expensive and complex process. It involves a lot of documentation, legal formalities, etc. 2.Lack of secrecy : The Companies Act has made it compulsory for a public company to provide a lot of information to the public as well as to the office of the Registrar of Companies from time to time. This makes it difficult for the company to maintain secrecy about its operations. 3.Impersonal work environment:Separation of ownership and management results in lack of motivation. Officers of the company may not take sufficient initiatives and personal efforts for the betterment of the company. Due to the large size of a company, it is very difficult for the top management to maintain personal contact with the employees, customers and creditors.

Company form of business organisation suffers from the following limitations :
1.Complexity in formation : The formation of a company is a very time consuming, expensive and complex process. It involves a lot of documentation, legal formalities, etc.
2.Lack of secrecy : The Companies Act has made it compulsory for a public company to provide a lot of information to the public as well as to the office of the Registrar of Companies from time to time. This makes it difficult for the company to maintain secrecy about its operations.
3.Impersonal work environment:Separation of ownership and management results in lack of motivation. Officers of the company may not take sufficient initiatives and personal efforts for the betterment of the company. Due to the large size of a company, it is very difficult for the top management to maintain personal contact with the employees, customers and creditors.

Employment

Professional

The leader of the Jacobin club was Maximilian Robespierre.

The Jacobins or the society of the Friends of the Constitution was the most famous and influential club prior to the French Revolution. 

The Jacobin gots its name from the former convent of St Jacob in Paris. 

It became an important rallying point for people who wished to discuss government policies and plan their own forms of action.

The member of Jacobin club belonged mainly to the less wealthy society which included small shopkeepers, printers, artisans like shoe-makers, watch-makers, servants, daily- wage workers, party cooks etc.

1. Economic responsibility : Basically, a business enterprise is an economic institution. Therefore, its primary responsibility is to produce the goods and services according to the demands of the society and to earn profit.
2. Legal responsibility : The responsibility of every business is to carry out business activities within the laws of the country. Since these laws are meant for the good of the society, a law abiding enterprise is a socially responsible enterprise as well.
3. Ethical responsibility: This refers to the behaviour of the firm expected by the society but not defined by law. For example, respecting the dignity of employees etc.
4. Discretionary responsibility: These obligations are assumed by the enterprises voluntarily. For example: Donation to charitable institutions, helping the affected people during floods, earthquakes, etc. The management of the company is responsible to safeguard the capital investment by avoiding speculative activities and investing the money in healthy business ventures to get good returns.