In: Finance
please explain this abstract thinking for me in relation to finance or financial management...
'' lending hunting instrument to fellow clansman for period of time with understanding of being returned later with part of the kill
Let us first understand what this phrase means in a basic sense:
A resource is being made available to someone who needs it ( here the hunting instrument is being made available to the clansman). The returns expected by the lender is to receive a part of the kill, that is, a part of the revenue generated or the sale proceeds as the case may be. The lender however bears no responsibility in case the borrower has not been able to make use of the hunting instrument.
In financial terms, the lender could be a creditor for whom the return of the capital invested should be accompanied by a fixed interest payable that is decided in advance to lending. Or it could also be an investor in the company who does not take part in the day-to-day management of the company but takes a share of the profits earned by the company. These type of investors are generally called angel investors in financial jargon.