Classification of sources of finance, Financial Management

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CLASSIFICATION OF SOURCES OF FINANCE

In the market, there are several sources of finance, with conflicting risk characteristics and with conflicting cost structures. Numerous management experts have tried to categorize them into numerous categories based on the time factor, source of generation, ownership pattern, and convenience. The resulting classification of finance is as follows:

•On the basis of ownership - own capital and borrowed capital

•On the basis of period - long term, medium term and short term

•On the basis of convenience - security financing (shares, debentures etc),

Internal financing (Depreciation funds, retained earnings, reserves etc),

Loan Financing (short term loans, medium term loans and long term loans)

•On the basis of source of generation - internal sources and external sources

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