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Security Finance - Sources of Finance, Accountancy and Financial management Video Lecture | Accountancy and Financial Management - B Com

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FAQs on Security Finance - Sources of Finance, Accountancy and Financial management Video Lecture - Accountancy and Financial Management - B Com

1. What are the different sources of finance?
Ans. The different sources of finance include equity financing, debt financing, retained earnings, venture capital, and bank loans. Equity financing involves raising funds by selling shares of the company to investors, while debt financing involves borrowing money from creditors and repaying it with interest. Retained earnings refer to the profits that are reinvested back into the company. Venture capital is funding provided by investors to start-up or small businesses in exchange for ownership equity. Bank loans are loans provided by banks to businesses that need financial assistance.
2. What is accountancy and how does it relate to financial management?
Ans. Accountancy is the practice of recording, classifying, summarizing, and interpreting financial transactions of a business. It involves the measurement, disclosure, and provision of financial information to help stakeholders make informed decisions. Financial management, on the other hand, encompasses the planning, organizing, directing, and controlling of financial resources within an organization. Accountancy is an integral part of financial management as it provides the necessary financial information and reports for effective decision-making and financial control.
3. How does equity financing work?
Ans. Equity financing involves raising funds by selling shares or ownership stakes of a company to investors. Companies issue shares in the form of common stock or preferred stock. Common stock represents ownership and voting rights in the company, while preferred stock has priority over common stock in terms of dividends and liquidation. Investors who purchase shares become shareholders and may receive dividends if the company generates profits. Equity financing allows companies to raise capital without incurring debt, but it also dilutes ownership and control as more shares are issued.
4. What is the role of venture capital in financing businesses?
Ans. Venture capital plays a crucial role in financing start-up or small businesses with high growth potential. Venture capitalists are investors who provide funding to businesses in exchange for an ownership stake or equity. They typically invest in early-stage companies that have innovative ideas, strong growth prospects, and the potential for high returns. In addition to capital, venture capitalists often provide expertise, guidance, and networking opportunities to help the business succeed. Venture capital funding can be critical for businesses that may not have access to traditional financing sources.
5. How do bank loans contribute to the financing of businesses?
Ans. Bank loans are a common source of financing for businesses. They involve borrowing money from banks or financial institutions and repaying it over a specified period, typically with interest. Bank loans can be used for various purposes such as working capital, expansion, purchasing assets, or funding specific projects. The terms and conditions of bank loans vary based on factors such as creditworthiness, collateral, interest rates, and repayment terms. Bank loans provide businesses with access to capital that can be crucial for growth and operations, but they also come with the obligation to repay the borrowed amount within the agreed-upon terms.
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