Financial Management

Zero-Based Budgeting | Definition, Methods, Example, Process, Advantages & Disadvantages

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What is Zero-Based Budgeting ? Zero-based budgeting (ZBB) is a financial management approach where all expenses must be justified for each new period, regardless of whether they are carried over from previous budgets. Unlike traditional budgeting methods, which typically start with the previous budget as a baseline and adjust from there, ZBB requires a thorough … Read more

Preference Shares | Definition, Types, Feature, Advantage & Disadvantage

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Preference Shares


Contents : 
  • Meaning & Definition of Preference Shares.
  • Features of Preference Shares.
  • Classification / Types of Preference Shares.
  • Advantages and Disadvantages of Preference Shares.
  • Differences Between Equity Shares and Preference Shares.

What do you mean by Preference Shares ? 


The parts of corporate securities are called as preference shares. It is the shares, which have preferential right to get dividend and get back the initial investment at the time of winding up of the company. Preference shareholders are eligible to get fixed rate of dividend and they do not have voting rights.

Meaning of Preference Shares 


Preference shares are those shares which carry certain priority rights in regards to the payment of dividend and return of capital and at the same time are subject to certain limitations with regard to voting rights. According to Indian Companies Act, 1956 Preference share is that part of the share capital of the company which is endowed with the following preferential rights :

i) Preference as to fixed rate of dividend.
ii) Preference as to repayment of capital in the event of the company being winding up.

Preference shareholder is entitled to receive the fixed rate of dividend out of the net profits of company prior to declaration or distribution of dividend on equity shares. The available net profits of the company are applied for paying specified rate of dividend to preference shareholders.

What is Debenture? | Definition, Types, Features, Advantage & Disadvantage

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Debenture

Contents :
  1. Meaning and Definition of Debenture.
  2. Procedure for Issue of Debentures.
  3. Types of Debentures.
  4. Characteristics of Debentures.
  5. Advantages and Disadvantages of Debenture.


What is Debenture ?


A company may final part of its capital needs by raising loans by issuing debentures. The short-term requirements are usually made by the company out of borrowing from commercial banks in the form of overdraft, cash credit and term loans. The long term finance required for supplementing the share capital is raised by issuing debentures, if the earnings of the company are constant and sufficient to meet interest liability and to make provision for repayment of the principal amount on maturity. Debenture capital is therefore, known as debt capital and is shown on the liability side of Balance Sheet.

Meaning of Debentures 


The word debenture is derived from the Latin word ‘Lebere’ meaning ‘to owe’. In its simplest sense it means a document which either creates or acknowledges a debt. A company can raise finances by issuing debentures. A debenture may be defined as the acknowledgement of debt by a company. Debentures constitute the borrowed capital of the company and they are known as creditorship securities because debenture holders are regarded as the creditors of the company.

Debenture

Definitions of Debenture 


General Definition :
“A debenture is a document issued by the company as an evidence of debt. It is the acknowledgement of the company’s indebtedness to its holders.”

Palmer :
“Any instrument under seal of the company, evidencing a deed, the essence of it being admission of indebtedness. “

Evelyn Thomas :
“It is a document under the company’s seal which provide for the payment of a principal sum and interest thereon at regular intervals which is usually secured by a fixed or floating charge on the company’s. property or undertaking and which acknowledges a loan to the company.”

What is Finance? | Definition, Types, Sources & Features

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Contents :  Meaning and Definitions of Finance. Various Features of Finance. Types of Finance. Internal and External Sources of Finance. What is Finance ? Finance is the soul of economic activities. To perform any economic activity, certain resources are needed which are to be pooled in terms of money (i.e. in the form of currency … Read more

What is Equity Shares? | Meaning, Characteristics, Advantages & Disadvantages

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Contents : Meaning of Equity Shares. Characteristics of Equity Shares. Advantages of Equity Shares. Disadvantages of Equity Shares. What is Equity Shares ?  The equity shares may be regarded as the foundation of the financial structure of a company. They occupy a primary position. They represent the ownership capital of a company. The equity shareholders collectively own the company … Read more

What is Dividend? | Meaning, Types, Measures & Dividend Policy

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Contents : Meaning of Dividend. Background of Dividend Policy. The Dividend Payment Time Line. Forms / Types of Dividend. Measures of Dividend. Meaning of Dividend Policy. Factors Influencing Dividend Decision. What is Dividend ? From the viewpoint of the shareholders, dividends represent compensation for postponing consumption. The dividend policy of the firm relates to various … Read more

Mutual Funds | Definition, Objectives, Types, Functions, Guidelines, Advantages & Disadvantages

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What is Mutual Funds ? A mutual fund is a pool of money representing the savings made by a number of investors. The funds so collected are managed by professionals by investing in equity as well as debt instruments like stocks, debentures, bonds, money market and other financial instruments. The job of the fund manager … Read more

Capital Budgeting? | Definition, Types, Process, Features, Importance

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CAPITAL EXPENDITURE CONTROL / CAPITAL BUDGETING Contents – 1. Concept and Definition of Capital Budgeting. 2. Features of Capital Budgeting. 3. Types and Process of Capital Budgeting. 4. Factors Influencing Capital Budgeting. 5. Importance/Need of Capital Budgeting. 6. Difficulties in Capital Budgeting. 7. Types of Capital Expenditure Decision/Control. Concept of Capital Budgeting / Capital budgeting meaning … Read more

Annuity | Definition, Types, Examples, Formula, Advantages & Disadvantages

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What is an Annuity ? An annuity is a financial product that provides a series of payments made at equal intervals. Typically used as a form of retirement income, annuities are contracts between an individual and an insurance company, where the individual pays either a lump sum or a series of premium payments to the … Read more

Portfolio Management | Meaning, Types, Objectives, Process & Strategies

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When it comes to growing your wealth and securing your financial future, portfolio management is the name of the game. Whether you’re just dipping your toes into investing or you’re a seasoned pro, getting a handle on portfolio management can make all the difference. In this post, we’ll break down what you need to know … Read more