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Mahesh Avhad (02)

Omkar Bandekar (03)
Devendra Dhakate (10)
Nandita Kandalgaonkar (23)
Tahseen Fatima (13)
Srividhya Pattabiraman (47)
Shweta Richharia (41)
 °ash management

°oncept
 Used in 2 sense
1. Narrow sense
2. Broader sense
Motives of Holding °ash
 Transactional motive
- to meet routine cash requirement (operating expense)
 Precautionary motive
- For unanticipated and unpredictable(strikes)
 Speculative motive
-to gain advantage of opportunities(purchase at favorable
prices)
 °ompensative motive
- Minimum balance of cash at bank
 To prevent bankruptcy
 Good relation with bank
 Good relation with trade creditors & suppliers
 To lead strong credit rating
 To maintain balance level
 °ash °ycle
A. Material ordered
B. Material received
°. Payments
D. °heque clearance
E. Goods sold
F. °ustomer mails payment
G. Payment received
H. °heques deposited
I. Funds collected
 ãays of improving net cash flow
 Increase sales
 Reduce direct & indirect cost and OH expenses
 Increase prices especially to slow prayers
 Reduce the amount/time of credit given to the
customer
 Bill as soon as work has been done or order is
fulfilled
 Improve systems for paying suppliers
continued
 Use of 80/20 rule to control inventories,
receivables and payables
 Improve systems for paying suppliers
 Use more proactive collection techniques
 Add late payment charges or fees where possible
 Re-negotiate bank facilities to reduce charges
 Seek to extent debt repayment periods
 Sell off surplus assets or make them productive
 Raise additional equity
 Sample Question
 'ED ltd wishes to arrange for overdraft
facilities with its bankers during the period
April to June of a particular year when it will
be manufacturing mainly for stock. Prepare a
cash budget for the above period from the
following data . Indicating the extent of bank
facilities the company will require at the end
of each month.
 Source of finance

 Equity
Equity shares are also termed as ordinary
shares or common shares and the holders of
such shares are known as shareholders or
stockholders
 Shares

 Under section 2 clause 46 of the Indian

companies act, 1956.
͞ share means share in the share capital of the
company and includes stock except where a
distinction between stock and share is
expressed or implied͟
 ãho is Shareholder
 Subscribers to the memorandum of a
company
 Other persons, who agree in writing to
become the members of the company

` 
 
  
 
  

Minimum 2 7
Maximum 50 Unlimited
 Equity share
 _    capital is also called as the  
  capital of the company and the equity
share holders as the real risk bearers of the
company.
 Do not enjoy special rights
 In profit is not adequate they may not receive any
dividend
 In 
  
of the company the equity
share holder is the last person to receive back his
capital
  


  
 Unit value of the capital of a ltd comp
 It represents the interests of its share holder
in the capital of the comp.
› 
! 
 It is maximum capital a company can raise.
  


3. " 
 It is the part of authorized capital which is
actually offered to the prospective investors
for subscription
4. ð  
 The balance of authorised capital which is
not issued to the prospective investors.
 Basic concepts
]  
 The portion of the issued capital which has
been subscribed by the investors/public.
ß #  
 It is that part of the uncalled capital which
may only be demanded on winding up or
liquidation but not when the company is
going concerned
  

7. Paid-up share capital:
 It is that portion of the subscribes share
capital on which money hav been collected by
the issuing company. Here the balance is the
unpaid amount or calls in arrears.
8. °alls in arrears:
 It is that part of called-up capital which has
not been paid by the share holders
 Advantages of Equity Shares

1. It represents of permanent source of finance

2. It does not carry any fixed burden
3. It enhances the credit worthiness of the firm
Disadvantages of Equity Shares
1. It cost is very high
2. Issue of equity to outsiders causes dilution of
control
Debentures: As a source of finance

 Defined as an, ͞acknowledgement of debt,

given under the seal of the company and
containing a contract for the repayment of the
principal sum at a specified date and for the
payment of interest at fixed rate percent untill
the principal sum is repaid, and it may or may
not give the charge on the assets to the
company as security of the loan͟
 Features of Debentures

1. Debenture holders are the creditors of the

company
2. Interest of debentures has to be paid
irrespective of the fact whether the company
has made any profit or suffered a loss
3. Debenture holders have no voting rights
4. Debenture holders have a prior claim over
the share holders in the event of liqiudation
regarding the repayment of the money
 Features of Debentures

5. Debentures are generally secured on the

assets of the companies and therefore there is
less risk
 Types of Debentures

 Redeemable Debentures
 Irredeemable Debentures
 °onvertible Debentures
 Nonconvertible Debentures
 Secured Debentures
 Unsecured Debentures
 
 
$

 $
 

 :ong term capital  Safety and security of
 Tax benefits investment
 No interference in  Fixed income
management and control  :iquidity ʹ easy sale in stock
 :ower rate of interest than exchange
the rate of dividend  °onversion into shares
 u 
 
$

 $
 

 Fixed financial burden  No control
 Decrease in credit  No extra profit even
worthiness company earns huge
 Danger to existence of the amount of profit also.
company
$ 
 
 
 
Term loans typically carry fixed interest rates,
monthly or quarterly repayment schedules and
the set maturity date.
1. Intermediate term loans :
Usually running less than 3 years and generally
paid in monthly installments
2. :ong term loans :
These loans commonly set for more than 3
years. Most are between 3 and 10 years, and
some loan fall as long as 20 years.
 Types of term loan

 Short term loan : repayable within a period of

36 months.
 Medium term loans : repayable in more than
36 months and less than 72 months.
 :ong term loans : repayable in more than 72
months.
 Basic features of term loan
 Maturity : mostly for a period of 6-10 years
 Direct negotiation : It avoids underwriting
commission and other floatation costs
 These are provided on the basis of formal
agreement which consist of term and
conditions.
 These are granted on the basis of a detailed
appraisal of the project
 Basic features of term loan

 Security : There are 2 types of security

 Primary security : they are secured by the
assets acquired using term loan funds
 Secondary security : They are secured by
company͛s current and future assets.