funds presentation in accounting

8/12/2019 Funds Presentation in Accounting

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INSTITUTE OF INTERNATIONAL

BUSINESS & RESEARCH


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PRESENTATION

ON

OWNED FUNDS Vs

BORROWED FUNDS


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Presented by:

Vikas Singh Rawat

Vikas Shukla


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Road map:-WHAT IS FUNDS?

TYPES OF FUNDS?WHAT IS OWNED FUNDS?

WHAT IS BORROWED FUNDS?

WHAT ARE THE DIFFERENCE BETWEEN OWNED

& BORROWED FUNDS?


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FUNDSFunds refers to all the financial

resource of the company.

Funds has been understood as cashonly.

Funds is a working capital.Working capital is the excess of current

assets over current liabilities.


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STRUCTURE OF FUNDS

OWNEDFUNDS

FUNDS

BORROWED FUNDS

Equity share capitalPreference share

capitalShare premium

Retained earning

Term loansDebentures

Deferred paymentliabilities

Other long-term debts


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WHAT IS OWNED CAPITAL?Owned funds represents the amount contributed by

the owners of a business which some times includeshares with retain earning.

Owned funds is the capital amount which is raised orcontributed by the members of the company.


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The owners of a business are known as shareholders. There

are two types of shareholders- Preference shareholders

& Equity shareholders

Advantages of Preference shareholders:-The Preference Shares carry limited voting

right through they are a part of the capital,As an instrument of financing the cost of

capital of preference shares is less than that of

equity shares.The preference shares financing may also

provides a hedge against inflation.


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Limitation of Preference shareholders:-The cost of capital of preference share is higher than

the cost of debt,

The compulsory redemption of preference shares after20 years will entail a substantial cash outflow from thecompany.

If the company is not able to earn a return at least

equal to the cost of preference share capital, then itmay result in decrease in EPS for the equityshareholders.


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Advantages of Equity Financing:You can get underway without the burden of debt on

your back.

prospectus for your investors.

Depending on who your investors are, they may offervaluable business assistance.

Disadvantages of Equity Financing:

Investors do expect a share of the profits.Need to check with the Securities and Exchange

Commission to see the requirements before you makedecisions for investments.


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WHAT IS BORROWED FUNDS:A borrowed funds can be defined as an amount owed

to a person or organization for funds borrowed.

Borrowed can be represented by a bond, loanmortgage or other form stating repayment terms and,if applicable, interest requirements.


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Advantages of investing in bonds:-

Bonds are predictable or well predetermined.

Bonds are more steady then stocks.

The interest rates paid by bonds typically exceed thosepaid by banks .

Disadvantages of bonds:-Unlike stocks, bonds don't offer the possibility of high

long-term returns.

Companies and municipalities can and do go bankrupt.


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Advantages of Debt Financing:-

Debt financing allows you to have control of your owndestiny regarding your business.

The interest you repay on your loan is tax-deductible. The lender(s) from whom you borrow money do not

share in your profits.

You can apply for a Small Business Administration

loan.


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Disadvantages of Debt Financing:-

If you dont make loan payments on time , you can ruinyour credit rating and make borrowing in the futuredifficult or impossible.

For a new business, commercial banks may requireyour personal assets before sanction of loan.

Any time you use debt financing, you are running the

risk of bankruptcy.


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Difference between owned Vs Borrowed

funds

OWNED FUNDS BORROWED FUNDS

It is also known asequity.

Investor received partialownership in thecompany in exchangefor their funds. It does

not have to be repaid. It involves money only

from owners.

It is also known as debts.

It involves borrowingmoney from lenders &investor.

The full amount which isborrowed will be repaidin future usually withinterest.


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It provide dividend tothe owners.

Dividend payable arenot tax deductable.

No payment

requirement. It mayreceived dividend butonly out of retainedearning.

It requires sharedcontrol of thecompany and may

imposed restriction.

It provide interest to theshareholder.

Interest payment is taxdeductable.

Require regular interest

payments .Companymust generate cash flowto pay.

It has little or no impactof the company.


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WE REALLY APPRECIATE YOURPATIENCE AND KIND ATTENTIONFOR MAKING OUR PRESENTATION

SUCCESSFUL..

THANK YOU !!!!!

funds presentation in accounting

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