COURSE CONTENT

• Unit-1
• Means of financing:Share Capital, Term Loans, Debentures, Leasing, and Other forms of Funding.
• Unit-2
• Financial markets and Instruments:Types of Financial Markets: Primary and Secondary, Indices
- NIFTY & SENSEX (meaning & composition)Financial Instruments: Shares, Debt Instruments,
Money Market Instruments, Long Term Financial Instruments, Derivatives (Future, Forward,
option, swaps),Fundamental and Technical Analysis, SEBI.
• Unit-3
• Banking & Financial Institutions:Types of Banks, Types of A/C in Banks, Banks various Rates,
Digital Banking, Functions of Central Bank (RBI).NBFCs.
• Unit-4
• Insurance:Basic characteristics of insurance, Types of Insurance& its features, Indemnity,
Insurable Interest, Subrogation, Utmost good Faith, IRDA.
• Unit-5:
• Mutual Funds: Introduction to mutual funds, Benefits of mutual funds, Types of mutual fund-open
ended close-ended. Risk in mutual funds, Alternative investment market, hedge funds and Pension
funds.
Unit 1 Means Of Financing
Financing is the process of providing funds for business activities, making
purchases, or investing.
Financial institutions, such as banks, are in the business of providing capital to
businesses, consumers, and investors to help them achieve their goals.
The use of financing is vital in any economic system, as it allows companies to
purchase products out of their immediate reach.
Financing is a way to leverage the time value of money (TVM) to put future expected
money flows to use for projects .
•There are two types of financing: equity financing and debt financing.
•The main advantage of equity financing is that there is no obligation to repay the
money acquired through it. Equity financing places no additional financial burden
on the company .
• Debt financing tends to be cheaper and comes with tax breaks.
However, large debt burdens can lead to default and credit risk.
• The weighted average cost of capital (WACC) gives a clear picture of a
firm's total cost of financing.
• Types of Financing

• 1.Equity
• 2. Debt
• 3.Combination of Debt and Equity
 SHARE CAPITAL
• Share capital is the money a company raises by issuing common or preferred
stock. The amount of share capital or equity financing a company has can
change over time with additional public offerings.
• What are shares?
• The capital of a company is divided into shares. Each share forms a unit of
ownership of a company and is offered for sale so as to raise capital for the
company. Shares can be broadly divided into two categories - equity and
preference shares.
• Equity shares give their holders the power to share the earnings/profits in the
company as well as a vote in the AGMs of the company. Such a shareholder
has to share the profits and also bear the losses incurred by the company.
• Preference shares earn their holders only dividends, which are fixed, giving
no voting rights.

• Equity shareholders are regarded as the real owners of the company. When
the shares are offered for sale directly by the company for the first time,
they are offered in the primary market, whereas the trading of shares takes
place in the secondary market.
 Types of Share Capital
• Authorized Share Capital
• Before a company can raise equity capital, it must obtain permission to
execute the sale of stock. The company must specify the total amount
of equity it wants to raise and the base value of its shares, called the
par value.
• The maximum amount of share capital a company is allowed to raise is
called its authorized capital.
• This does not limit the number of shares a company may issue but it
puts a ceiling on the total amount of money that can be raised by the
sale of the shares.
Issued Share Capital
• The total value of the shares a company elects to sell to investors is
called its issued share capital.
• The par value of the issued share capital cannot exceed the value of the
authorized share capital.
• Some companies—depending on where they are located—can issue
investor called-up shares with the promise to be paid in full at a later
date.
• A company that wants to raise more equity and increase its share
capital can do so by obtaining authorization (from its Board of
Directors and shareholders) to issue and sell additional shares.
 Term Loans

• Term Loans are short-term loans offered to businesses for capital

expenditure and expansion, among others. Generally having a tenure up to
96 months, these loans are tailor-made to suit the various financial needs
of businesses.
• Minimum Documentation , Quick Disbursal of funds and repayment
flexibility are some of the major benefits of these loans.
• Term loan is also called as demand loan. A term loan is a funding from a
bank for an amount that is to be repaid as per EMI (Equated Monthly
Instalment) schedule. The interest rate can be either fixed or floating rate
as per the choice of the borrower.
• Types Of term Loans
Term loans are available to suit a borrower’s funding requirement based
on factors like:
• Amount of funding required
• Repayment capacity of the borrower
• Regular cash flow and in -hand availability of the funds

• Based on this there are 3 types of term loan

• Short term Loan
• Intermediate Term Loan
• Long term Loan
• Short-term loans: These types of term loans are usually offered to firms
that don't qualify for a line of credit. They generally run less than a year,
though they can also refer to a loan of up to 18 months.
• Intermediate-term loans: These loans generally run between one to three
years and are paid in monthly installments from a company’s cash flow.
• Long-term loans: These loans last anywhere between three to 25 years.
They use company assets as collateral and require monthly or quarterly
payments from profits or cash flow. They limit other financial
commitments the company may take on, including other debts, dividends
, or principals' salaries, and can require an amount of profit set aside
specifically for loan repayment.
 Common Attributes of Term Loans

• Term loans carry a fixed or variable interest rate, a monthly or quarterly

repayment schedule, and a set maturity date.
• If the loan is used to finance an asset purchase, the useful life of that
asset can impact the repayment schedule.
• The loan requires collateral and a rigorous approval process to reduce
the risk of default or failure to make payments.
• However, term loans generally carry no penalties if they are paid off
ahead of schedule.
 Debentures
• A debenture is a type of debt instrument that is not backed by any
collateral and usually has a term greater than 10 years.
• Debentures are backed only by the creditworthiness and reputation of
the issuer.
• Both corporations and governments frequently issue debentures to
raise capital or funds.
• Some debentures can convert to equity shares while others cannot.
 Features of Debentures
• Debentures may pay periodic interest payments called coupon payments.
• Like other types of bonds, debentures are documented in an indenture.
• An indenture is a legal and binding contract between bond issuers and
bondholders.
• The contract specifies features of a debt offering, such as the maturity date,
the timing of interest or coupon payments, the method of interest
calculation, and other features. Corporations and governments can issue
debentures.
• Governments typically issue long-term bonds—those with maturities of
longer than 10 years. Considered low-risk investments, these government
bonds have the backing of the government issuer.
• Corporations also use debentures as long-term loans. Debentures are
advantageous for companies since they carry lower interest rates and longer
repayment dates as compared to other types of loans and debt instruments.
• Interest Rate The coupon rate is determined, which is the rate of interest that
the company will pay the debenture holder or investor. This coupon rate can
be either fixed or floating. A floating rate might be tied to a benchmark such
as the yield of the 10-year Treasury bond and will change as the benchmark
changes.
• Credit Rating The company's credit rating and ultimately the debenture's
credit rating impacts the interest rate that investors will receive. Credit-rating
agencies measure the creditworthiness of corporate and government
issues. These entities provide investors with an overview of the risks involved
in investing in debt.
• Maturity Date For nonconvertible debentures the date of maturity is also an
important feature. This date dictates when the company must pay back the
debenture holders. The company has options on the form the repayment will
take. It is as redemption from the capital, where the issuer pays a lump sum
amount on the maturity of the debt. Alternatively, the payment may use a
redemption reserve, where the company pays specific amounts each year
until full repayment at the date of maturity.
 Types of Debentures
• Registered vs. Bearer
• When debts are issued as debentures, they may be registered to the
issuer. In this case, the transfer or trading in these securities must be
organized through a clearing facility that alerts the issuer to changes
in ownership so that they can pay interest to the correct bondholder.
• A bearer debenture, in contrast, is not registered with the issuer. The
owner (bearer) of the debenture is entitled to interest simply by
holding the bond.
• Redeemable vs. Irredeemable
• Redeemable debentures clearly spell out the exact terms and date by
which the issuer of the bond must repay their debt in full.
• Irredeemable (non-redeemable) debentures, on the other hand, do
not hold the issuer liable to repay in full by a certain date. Because of
this, irredeemable debentures are also known as perpetual
debentures.
• Convertible vs. Nonconvertible
• Convertible debentures are bonds that can convert into equity shares of the issuing
corporation after a specific period. Convertible debentures are hybrid financial
products with the benefits of both debt and equity. Companies use debentures as
fixed-rate loans and pay fixed interest payments. However, the holders of the
debenture have the option of holding the loan until maturity and receiving the
interest payments or converting the loan into equity shares.
• Convertible debentures are attractive to investors that want to convert to equity if
they believe the company's stock will rise in the long term. However, the ability to
convert to equity comes at a price since convertible debentures
pay a lower interest rate compared to other fixed-rate investments.
• Nonconvertible debentures are traditional debentures that cannot be converted into
equity of the issuing corporation. To compensate for the lack of convertibility
investors are rewarded with a higher interest rate when compared to convertible
debentures.
 Pros And Cons of Debentures
• Pros A debenture pays a regular interest rate or coupon rate return to
investors.
• Convertible debentures can be converted to equity shares after a specified
period, making them more appealing to investors.
• In the event of a corporation's bankruptcy, the debenture is paid before
common stock shareholders.
• Cons Fixed-rate debentures may have interest rate risk exposure in
environments where the market interest rate is rising.
• Creditworthiness is important when considering the chance of default risk
from the underlying issuer's financial viability.
• Debentures may have inflationary risk if the coupon paid does not keep up
with the rate of inflation.
 LEASING

• A lease refers to a contract where one party grants a right to use a

property or land to another party in return for consideration and for a
specific period of time. Both the parties enter into a lease agreement
specifying the terms and conditions of the agreement. The party who
owns the leased premises or property is the lessor. The party accepting
the leased property is the lessee.
• A lease is a contractual arrangement calling for the user (referred to as the
lessee) to pay the owner (referred to as the lessor) for the use of an asset.
Property, buildings and vehicles are common assets that are leased.
Industrial or business equipment are also leased.
 Types of Leasing
• 1.Finance Lease
• A finance lease is a lease in which the lessor passes nearly all the risks & benefits of
asset holding to the lessee in exchange for lease rents. In other terms, it places the
lessee in a similar position as if they have bought the asset.
• Operating Lease
• The lessee utilises the property for a specified time under an operational lease. After
providing notice, any party has the opportunity to cancel the lease. In this kind of
lease:
• The lessor bears all costs.
• The lessor would not be able to recover the entire item cost.
• The lessor provides specialised services.
• It is preferable when the equipment is expected to become obsolete.
• Leveraged Lease
• A leveraged lease is one in which the lessor loans a part of the purchase cost from lenders or financial
firms. The assets and lease rents serve as collateral for this loan, and the debt is paid straight from
lease rents by either a lessee or a lessor.

• Conveyance Lease
• The lease under a conveyance kind would be for a lengthy period with the explicit goal of transmitting
property ownership to the lessee.

• Sale and Leaseback

• A corporation that owns the property sells it all to the lessor in such a sale & leaseback transaction. The
lessor pays for the property instantly but leases it to the seller. As a result, the asset's seller turns to the
lessee. The investment is retained by the seller, who seems to be a lessee, while ownership is owned
by the lessor, who is the purchaser. This agreement is made so that the owning firm may acquire
financing to manage the company and the asset.
• Complete and Non-Pay-Out Lease
• A complete pay-out lease is the one where the lessor leases the entire worth of the leased property. In a
non-pay-out rental, the lessor repeatedly rents out the same property.

• Specialised Service Lease

• The lessor or holder of the property is an expert in the asset he is renting out. He not just leases out but
provides the tenant with customised personal attention. Electronics, autos, air conditioners, and other such
items are examples.

• Net and Non-Net Lease

• The lessor is responsible for maintenance, insuring, plus other incidental expenditures under a non-net
lease. As mentioned earlier, the lessor is unconcerned with the upkeep costs under a net lease. The lessor
solely provides financial services.

• Sales Aid Lease

• When the lessor joins an advertising alliance with a producer, this is referred to as a sales assistance lease.

• Cross Border Lease

• Cross-border leasing refers to leasing across national borders. Shipping, aviation service, and other
services fall within this category.
• Tax Oriented Lease
• A tax-oriented lease is not borrowing on collateral but counts as a lease.

• Import Lease
• The firm offering the material for lease under an import lease might be situated in a foreign nation, yet
the lessor & lessee may be from the same country.

• International Lease
• In this case, the participants in the leasing transactions may be from different nations, which is
analogous to a cross-border lease.

• Gross Lease
• A gross lease is often referred to as a full-service rental. It is a lease in which the landlord covers all
property expenditures from the tenant's rental. Taxes, licensing, and upkeep are examples of such
spending.

• Net Lease
• A net lease is just a commercial lease in which the person pays not only for the leased area but
likewise for all or a portion of the typical expenditures. These expenses are often related to the
property's maintenance or operation.
• Modified Gross Lease
• The modified gross lease seems identical to a gross lease. Even when the renter requests the rent in
one lump sum, there is room for negotiation between the sides. The agreement's sides can discuss the
charges contained in the introductory rental price. Furthermore, cleaning services and power are not
included on the list.
 Forms Of Funding
• Funding is the money that a company receives from various investors.
When someone wants to create a new company, they often need funding
to start business operations and keep the company running until there is
a positive cash flow. Anew business needs funds to develop its model and
products, hire employees, build a customer base, spread into new offices,
expand its operations, create an advantage over competitors or grow
from a private company to a public one.
• The various types of Funding are-
• 1.Venture Capital
• Venture capital is a form of private equity financing that is provided by
firms or funds to startup, early-stage, and emerging companies that have
been deemed to have high growth potential or which have demonstrated
high growth.
• Grants Grants are a form of funding that does not require you to pay
back to allocated funds. Like R&D tax credits .
Government grants. Grants can be obtained from different levels of the
government for a variety of purposes and industries.
• Angel investors are typically considered part of the seed round of
funding, meaning they provide funding for businesses in their early
stages. Angel investors are high-net-worth individuals who get an equity
stake in return for their financing. They expect to make a profit
• Small Business Loans. One can avail of business loans from banks for the
funding of a startup. the most commonly known funding source is a
small business loan. These are relatively easy to obtain and can be a
great source ..
• Bootstrapping. This is when you use your own personal savings to finance
your business. It's often the cheapest and quickest way to get started.
• Seed Funding As the name suggests, 'Seed funding' is the funding for a
startup when it is at the seedling stage i.e., inception, ideation, or the
beginning stage. It is essential for every entrepreneur to understand what
constitutes seed funding and why it is essential for building their businesses.
• Business Incubator A business incubator is a program that gives very early-
stage companies access to mentorship, investors and other support to help
them get established.
• Venture capital (VC) is generally used to support startups and other
businesses with the potential for substantial and rapid growth. VC firms
raise money from limited partners (LPs) to invest in promising startups or
even larger venture funds.
• CrowdFunding represents a process of raising funds to fulfill a certain
project or undertake a venture by obtaining small amounts of money
from a large number of individuals. The crowdfunding process usually
takes place online.