who controls the traditinal financial sources?
Answers
Answer:Traditional Sources of Finance
Internal resources have traditionally been the chief source of finance for a company. Internal resources could be a company’s assets, factoring or invoice discounting, personal savings and profits that have not been reinvested or distributed among shareholders. Working capital is a short term source of finance and is the money used for a company’s day-to-day activities, including salaries, rent, payments for raw materials and electricity bills.
Sources of Finance: Ownership Capital
Ownership capital is the capital owned by the shareholders of a company. A company can raise substantial funds through an IPO (initial public offering). These funds are usually used for large expenses, such as new product development, expansion into a new market and setting up a new plant. The various types of shares are:
Ordinary shares: These are also known as equity shares and give the owner the right to share the company’s profits and vote at the firm’s general meetings.
Preference shares: The owners of these shares may be entitled to a fixed dividend, but usually do not have the right to vote.
Companies that are already listed on a stock exchange can opt for a rights issue, which seeks additional investment from existing shareholders. They could also opt for deferred ordinary shares, wherein the issuing company is not required to pay dividends until a specified date or before the profits reach a certain level.
Unquoted companies (those not listed on stock exchanges) can also issue and trade their shares in over-the-counter (OTC) markets.
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