Sources of Business Income

Sources of Business Income

Equity/ Owner finance

It the owner from his own resources meets the financial need or requirement of business then the finance is called equity finance. In sole partnership. If the owner cannot meet or fulfill the financial need of business from his own resources and he also does not want to take loan can he can get additional funds or capital by admitting a trust worthy person who business as a partner.

A joint stock company can raise the capital by issuing its shares. The persons who provide capital to company by purchasing shares are called shareholders. Besides this the business concerns can obtain funds from their “Reserve Funds” in the time of need. Reserve fund is that part of the profit of business concerns, which is not distributed among the owners or shareholders rather kept with themselves in order to meet the sudden need of future.

informationmaker.blogspot.com

Debt / Borrowed Financing

When the owners are not in the position to meet financial need of business from their own resources, the deficiency of capital can be met by taking loan. The loans can be obtained from different individuals or financial institutions. The finance thus obtain is called debt or borrowed finance.