Sources of Finance: A Shift from the Past to Present
From the ages, the corporates have used equity and bank loans as the way of financing their capital needs
. But, with the changing economic conditions, the corporates have used various innovative (at that time only) ways of financing. Various types of preference shares, debentures and bonds have also become traditional today. These traditional instruments have become so popular that there are firms which provide rating for the creditworthiness of the instruments to the investors. The sources of finance for the modern world companies have got classification in terms of domestic and foreign, internal and external, etc.
The sources that have become popular and used by most of the companies of today (apart rom traditional) are lease financing and hire purchase, ploughing back of profits form the operation, sale of unutilised assets or non-performing business units and financing by venture capitalist.
The way corporates finances their need of capital have changed drastically over the years. The reasons could be many in numbers with supporting arguments for each reason. The main reason is that the percentage figures for savings by general public have increased dramatically over the years. The same could be explained by the fact that both of the above cause and effect are the two sides of coin. The increased savings have resulted in designing different ways of financing by the companies. The other secondary but important causes for the changes in sources of finances used by the corporate entities are increased knowledge of people to invest the savings, more organised and regulated economies, timely and concrete releases of financial results by the companies resulting into higher trust, etc.
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Sources of Finance: A Shift from the Past to Present
By: Locus Rags
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