What Are The Sources Of Raising The Fixed Capital?


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Muhammad Abdullah786 Profile
There are two sources of raising fixed capital by a company.
Owned capital
Borrowed capital
In order to finance fixed capital, a company depends on long term types of finance. If makes use of both the sources. Owned as well as borrowed. Owned capital is raised by issuing debentures, public deposit and loans from industrial and financial institutions. A company cannot make mistakes of financing fixed assets out of short term resource of finance as the funds invested in fixed assets are permanently sunk into the business and are not convertible into cash at a short notice. The sources of fixed capital, both owned and borrowed, are as follow.

Equity shares (owned capital): a company can raise capital by issuing equity or ordinary shares only. The equity shares by issuing equity or ordinary shares only. The equity shares are permanent sources of capital. The company has not to repay it except under liquidation. Equity shares holders are the real owner of the company. As dividend is to paid out of the profits, there are no burden on the resources of the company.

Loans from industrial and financial institutions (borrowed capital): another important source of raising long term finance is from the financial institutions like the IDBB<, PICIC, NIT, BEL. The loans are obtained both in local and foreign currency for the purchase of machinery equipments.

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