Long-term financing sources can be in the form of any of them: Share Capital or Equity Shares. Preference Capital or Preference Shares. Retained Earnings or Internal Accruals.

Public enterprises are the form of business organization which are owned by government either fully or partially. There are different types of public enterprises such as public corporation, departmental undertaking and government company. 

Features of Departmental Undertakings

It is established by the government, and its overall control rests with the minister. It is financed through government funds. It is subject to budgetary, accounting, and audit control. Its policy is laid down by the government, and it is accountable to the legislature.

NEED OF BUSINESS FINANCE:

Uses

1. Fixed Capital Requirement: In order to start a business, funds are needed to purchase fixed assets like land and building, plant and machinery.The funds required in fixed assest remain invested in the business for a long period of time.
2. Working Capital Requirement: A business needs funds for its day to day operation. This is known as working Capital requirements. Working capital is required for purchase of raw materials, to pay salaries, wages, rent and taxes.
3. Diversification: A company needs more funds to diversify its operation to become a multi-product company e.g. ITC.
4. Technology upgradation: Finance is needed to adopt modern technology for example uses of computers in business.
5. Growth and expansion: Higher growth of a business enterprise requires higher investment in fixed assets. So finance is needed for growth and expansion.

 Classification of Sources of Funds

(i) Period Basis On the basis of time period, a business finance can be classified in three categories.

(a) Long Term Finance Funds which are required to be invested In a business for a long period of time, that is more than five years are known as long term finance.

(b) Medium Term Finance The finance required by business enterprises for more than one year but less than five years is known as medium term finance.

(c) Short Term Finance The finance required for a short period upto one year is known as short term finance.

(ii) Ownership Basis On the basis of ownership, the sources can be classified into ‘owner’s fund’ and ‘borrowed fund’,

(a) Owner Fund It refers to the funds contributed by owners as well as the accumulated profit of the company this fund remains with the company and it has no liability to return this fund. e.g., equity shares, retained earnings.

(b) Borrowed Fund It refers to the borrowing of the firm. It includes all funds available by way of loans or credit

(iii) Source of Generation Basis Another basis of categorising the sources of funds can be whether the funds are generated from with in the organisation internal or from external sources.

Commerce is considered as the backbone of industry because it performs the following functions :

1. Helps in eliminating the hindrances of persons.
2. Helps in eliminating the hindrances of place.
3. Helps in eliminating the hindrances of time.
4. Helps in eliminating the hindrances of finance.
5. Helps in eliminating the hindrances of risk.
6. Helps in eliminating the hindrances of information.

Government Company is a company or an organization in which at least 51% of the paid up share capital is held by the central government or the state government or partly by both central and state government. These are many government companies, few of them are, Steel Authority of India Limited, Bharat Heavy Electricals Limited, Coal India Limited, State Trading Corporation of India, etc.

Management – concept, objectives, and importance. Management as Science, Art and Profession. Levels of Management. Management functions-planning, organising, staffing, directing and controlling.

Suitability: The public corporation is suitable where the undertakings require:

• monopoly powers.
• special powers, defined by the act or statute.
• regular grants from the government.
• an appropriate combination of public accountability & operational autonomy.

It is evident that each form has certain advantages as well as disadvantages. Therefore, it is important to choose an appropriate form of organisation.
Factors that determine the choice of form of
organisation:

1. Cost and ease in setting up the organisation: From the’point of view of initial cost, sole proprietorship is the preferred form as it involves least expenditure.
   A company form of organisation, on the other hand, is more complex and involves greater costs.
2. Liability : In case of sole proprietorship and
   partnership firms, the liability of the owners/ partners is unlimited. In Joint Hindu Family Business, only the Karta has unlimited liability. In cooperative societies and companies, however, liability is limited.
3. Continuity: In case the business needs a permanent
   structure, company form is more suitable. For short term ventures, proprietorship or partnership may be preferred.
4. Management ability : A sole proprietor
   may find it difficult to have expertise in all functional areas of management. In other forms of organisations like partnership and company, there is no such problem.
5. Capital consideration : Companies are in a better
   position to collect large amount of capital by issuing shares to a large number of investors. Partnership firms also have the advantage of combined
   resources of all partners. But the resources of a sole proprietor are limited.
6. Degree of control: If direct control over operations
   and absolute decision making power is required, sole proprietorship may be preferred.

A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals.

Ownership Capital : Ownership capital consists of the amounts contributed by the owners as well as their profit re-invested in the business. In a partnership firm, the funds contributed by the partners as capital are called ownership capital. Ownership capital remains permanently invested in the business.

Borrowed Capital: Borrowed fund include all funds available in the form of loans or credits. Loans are raised to business firms for specified periods at fixed rates of interest.

A cooperative organisation is an association of persons, usually of limited means, who have voluntarily joined together to achieve a common eco­nomic end through the formation of a democratically controlled organisation, making equitable dis­tributions to the capital required, and accepting a fair share of risk and benefits of the undertaking.

The term ‘Business risk’ refers to the possibility of inadequate profits or even losses due to uncertainties or demand for a particular product may decline due to change in tastes and preferences of consumers or due to increased competition from other producers. Decrease in demand will result in lesser sales and thereby lesser profits.
Causes of business risks: Business risks arise due to a variety of causes, which are classified as follows :

1. Natural causes : Human beings have little control over natural calamities like flood, earthquake,
   lightning, heavy rains, famine, etc. These natural calamities result in heavy loss of life, property and income in business.
2. Human causes : Human causes include such unexpected events as dishonesty, carelessness or negligence of employers, stoppage of work due to power failure, strikes, riots, management inefficiency, etc.
3. Economic Causes : These include uncertainties relating to demand for goods,competition,price,collection of dues from customers,change of technology or method of production etc.Financial problems like rise in interest rate for borrowings,heavy or higher taxes,etc.also come under these type of causes as they result in higher unexpected cost of operation of business.
4. Other causes : These are unforeseen events,such as political disturbances,mechanical failures such as bursting of boiler,fluctuations in exchange rates, etc.,which lead to the possibility of business risks.

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