Question

In practice, Business Organizations need finance to operate and attain their strategic objectives. critically identify the various forms of business organizations and explain how each of them raises their finances. Please include references for your answer

Answer 1

In India we say

"Finance is the Blood of Business."

Business Organizations need finance to operate and attain their strategic objectives.

The two sources of finance are:

1. Equity. (Owners Funds)

2. Debt. (Out siders Funds)

Every type of business organisation HAVE Equity and MAY HAVE Debt, But the manner/type of obtaining Equity and Debt changes from organisation to organisation.

Types and Business organisation and their typical source of finance.

1. Sole Proprietorship

Equity: Single person Brings from personal savings. Here it's generally called Capital. He may bring personal assets also to business in form of Equity.

Debt: Ask from family/Friend or Personal Loan from Bank.

2. Partnership.

Equity: Here few people bring from personal savings or Bring their Assets to Business.

Hereit's generally called Current and Capital Account.

Debt: Generally a Business Loan is taken from Bank.

3. Corporation/Company:

Equity: Here Large people pool in their savings. It's called Equity or Preference Share capital.

Debt: Corporate Loans, Bonds, Debentures.

(Sorry I don't have any reference link for my answer. I wrote it with my knowledge and experience.)

Thank you. Hope you find the answer helpful.