Revision: Finance and Accounting >> Sources of Finance Commercial Studies (English Medium) ICSE Class 10 CISCE

Business finance means money or funds required and used by business firms. In the words of Ronald Burns, “financing is the process of organising the flow of funds so that a business can carry out its objectives in the most efficient manner and meet the obligations as they fall due.”

• According to section 2(30) of the Companies Act, 2013, " Debenture includes debenture stock, bonds and any other securities of a Company, whether constituting a charge on the assets of the Company or not." 
• “A Debenture is a document given by a company as evidence of a debt to the holder, usually arising out of a loan and most commonly secured by a charge." -Topham
• According to Evelyn Thomas, "a debenture is a document under the company's seal which provides for the payment of a principal sum and interest thereon at regular intervals, which is usually secured by a fixed or floating change on the company's property or undertaking and which acknowledges a loan to the company".

• Capital market is a market for long‑term funds (more than one year), both equity and debt.
• It supplies finance for agriculture, trade and industry, helping investment and economic growth.
• Main suppliers of long‑term funds are individual savers, companies, banks, insurance firms and special financial institutions.

• Equity shares are ordinary shares that are not preference shares.
• They receive dividends only after preference shareholders are paid.
• There is no fixed dividend rate; the dividend depends on profits.
• In case of loss, no dividend is paid; in high profit, they may get more.
• Equity shareholders have voting rights and control company decisions.

• Preference shares get fixed dividends and capital back before equity shares.
• Cumulative preference shares carry forward unpaid dividends; non-cumulative do not.
• Participating preference shares get extra profit after equity dividends; non-participating shares get only fixed dividends.
• Convertible preference shares can be changed into equity shares; non-convertible shares cannot.
• Redeemable preference shares are repaid within a set time; irredeemable shares are not allowed under law.

• Debenture: A written promise by a company to repay a loan with interest.
• Legal View: Includes all debt instruments, as per the Companies Act, 2013.
• Key Features: Fixed interest, secured by assets, issued under seal, max 10-year term (30 for infrastructure).
• Debentureholders: They are lenders, not owners of the company.
• Bond vs Debenture: Bonds may have no fixed interest; debentures always do.