Sources of capital - SS1 Commerce Lesson Note

·         Shares: Shares are a way for individuals or organizations to invest in a company and become partial owners or shareholders. When a company issues shares, it raises funds by selling these shares to investors. Shareholders can benefit from the company's profits through dividends and may also have voting rights.

·         Debentures: Debentures are a type of long-term debt instrument issued by a company to raise capital. When you purchase a debenture, you lend money to the company for a specific period. In return, the company pays you regular interest payments until the maturity date when it repays the principal amount.

·         Retained Profit: Retained profit refers to the portion of a company's net income that is not distributed to shareholders as dividends but is retained within the company. This accumulated profit can be used as a source of capital for future investments, expansion, or operational needs.

·         Loans: Loans are funds borrowed from banks, financial institutions, or individuals for a specific purpose. Companies can secure loans to finance various activities, such as purchasing assets, funding projects, or managing cash flow. The borrowed funds need to be repaid over time, usually with interest.

·         Overdraft: An overdraft is a short-term borrowing facility offered by banks to individuals or companies. It allows the account holder to withdraw more money than what is available in their account, up to a predetermined limit. Overdrafts can be useful for managing temporary cash flow shortages or covering unexpected expenses.