TYPES OF CAPITAL PPT (BA-3)-1.pptx

TYPES OF CAPITAL:
On the basis if investment
On the basis of ownership
On the basis of time period

1. WELCOME

2. CH:4 MANAGEMENT OF CAPITAL TOPIC: TYPES OF CAPITAL PRESENTED BY: BHAKTI CHANCHAL CLASS: TY B.COM (A)

3. INTRODUCTION Capital is the life blood and nerve Centre of any Business. Just as circulation of blood is essential in the Human Body for maintaining life , Capital is very important for smooth conduct of business. It is the most important aspect without which no business idea can be conceived .

4. MEANING OF CAPITAL In accounting,  CAPITAL  means anything brought by the owner into the business in cash or in-kind(any item) Capital can also represent the accumulated wealth of a business , represented by its assets less liabilities.  Capital can also mean stock or ownership in a company . In general, capital is accumulated assets or ownership.

5. TYPES OF CAPITAL 1 . ON THE BASIS OF TYPE OF INVESTMENT OR PURPOSE : a) Fixed capital b) Working capital 2 . ON THE BASIS OF OWNERSHIP : a) Owned capital b) Borrowed capital 3. ON THE BASIS OF TIME PERIOD : a) Short term capital b) Long term capital

6. TYPE :1 ON THE BASIS OF TYPE OF INVESTMENT OR PURPOSE Every business requires funds for 2 main reasons i.e. , for its establishment and secondly to carry out day - to -day operations. So, on the basis of types of investment capital can be classified into: a) FIXED CAPITAL b) WORKING CAPITAL

7. FIXED CAPITAL Fixed Capital means that capital which is required for investment in production facility through purchase of f fixed assets such as plant ,machinery, land and building ,furniture , etc. this assets are needed to carry out regular operations of production and without them business activities cannot be pursued .Thus , Investment in fixed asset is the first initial step in establishing a company. And other investment is made in non current or intangible asset also called as fixed assets . non-current or intangible asset includes Goodwill, patent ,copyright, etc. Although they do not create any production facilities yet they are essential for conduct of the business.

8. IMPORTANCE OF FIXED CAPITAL ESTABLISHMENT OF COMPANY PROMOTION OF COMPANY MODERNISATION OF COMPANY REPLACEMENT OF AN OBSOLETE ASSETS EXPANSION AND DIVERSIFATION AUTOMATION OF COMPANY

9. FACTORS AFFECTING FIXED CAPITAL REQUIREMENT NATURE OF BUSINESS SCALE OF OPERATIONS TECHNIQUE OF PRODUCTION TECHNOLOGY UP-GRADATION GROWTH PROSPECTS DIVERSIFICATION

10. WORKING CAPITAL Working Capital refer to that part of company capital which is required for financing short-term or current asset such as cash ,marketable security, bill receivable ,inventories , etc It is the amount needed for day-to-day conduct of the business like purchase of raw material ,payment of wages , salaries , rent , etc. It can simply be said that the fund kept managing daily operations is known as Working Capital. W orking capital is generally used in two ways gross working capital and net working capital . gross working capital represent the amount invested in current assets such as cash , inventories, bills receivables , etc and net working capital is difference between current asset and current liabilities.

11. IMPORTANCE OF WORKING CAPITAL CONTINUATION IN BUSINESS OPERATIONS SECURITY AND CONFIDENCE CASH DISCOUNTS EFFICIENCY IN PRODUCTION GOODWILL PROPER UTILISATION OF FIXED CAPITAL

12. FACTORS AFFECTING WORKING CAPITAL NATURE OF BUSINESS SIZE OF BUSINESS CHANGES IN TECHNOLOGY LENGTH OF OPERATING CYCLE RATE OF GROWTH WORKING CAPITAL TURNOVER

13. TYPE : 2 ON THE BASIS OF OWNERSHIP There are 2 types of capital on basis of ownership : 1. OWNED CAPITAL : It refers to the capital which is provided by the owners of an organization . In case of sole proprietorship and partnership firm , the proprietor or partners themselves provide fund , whereas in case of joint stock company, funds are raised through issue of shares and reinvestment of earning this is known as owned capital. Owned capital includes external sources like equity shares, preference share and internal sources like retained earning , surplus , reserves , etc.

14. 2. BORROWED CAPITAL : Borrowed Capital is also called as Debt Capital or loan capital or Creditorship Securities. These are funds borrowed from either individuals or institutions. Borrowed F und consist of different types of Debenture ,Bonds, B ank Borrowings, Public Deposits , etc. Borrowed Capital is used to increase profitability of the company and this use is called leverage and the lenders of Borrowed capital are called creditors of the company. ON THE BASIS OF OWNERSHIP

15. There are 2 types of capital on the basis of time period : LONG TERM CAPITAL: long term capital is the capital which is used to meet the requirement of funds for a longer period of time that is a period exceeding 3 to 5 years. long term capital includes various sources like equity share, preference share, debenture, working capital term loans , etc. long term capital is used to purchase fix assets , part finance of permanent working capital, replacement of old machine, expansion of business , etc . TYPE : 3 ON THE BASIS OF TIME PERIOD

16. 2. SHORT TERM CAPITAL : short term capital is one which series to meet the short-term financial requirements of the company. short term capital generally for short period not exceeding the accounting year that is, one year . sources of short term capital and include bank loan, trade credit ,installment credit, advances, accounts receivable, commercial banks , etc. The requirement of short term capital may vary and it may be a few days, week, or month. Day to Day functioning of business transaction are done by finance from short term sources. ON THE BASIS OF TIME PERIOD

17. THANK YOU