Question

011. Preet Electricals Ltd. Has been successfully manufacturing electrical accessories fo
the past ten years. As the profit margin is good, the company has been managing all the
financial requirements of the business through the profits reinvested in the business
Identify the source of finance being mentioned in the given case and state its three
merits.
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Answer 1

Explanation:

Sources of finance for business are equity, debt, debentures, retained earnings, term loans, working capital loans, letter of credit, euro issue, venture funding etc. These sources of funds are used in different situations. They are classified based on time period, ownership and control, and their source of generation.

There are ultimately just three main ways companies can raise capital: from net earnings from operations, by borrowing, or by issuing equity capital. Debt and equity capital are commonly obtained from external investors, and each comes with its own set of benefits and drawbacks for the firm.