Determine the proportion of debt and equity, Financial Management

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Q. Determine the proportion of debt and equity?

Financing Decision: - This function is related to increasing of finance from different sources. For this reason the financial manager is to determine the proportion of debt and equity. In other sense there are two sources of finance:

(i) Debt:- Debt signifies long term loans and includes:

  • Debentures
  • Loan from Bank
  • Loan from Financial Institutions
  • Mortgage Loans

(ii) Equity: - Equity demotes to shareholder's funds and includes:

  • Equity Share Capital
  • Preference Share Capital
  • Reserve & Accumulated Profits

 


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