NISM Series XV : Research Analyst Certification Exam Notes
Page 42 Of 62
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Sources of Funds: A company has two primary sources of funds, owners' funds or equity capital and borrowed funds or debt capital
Reserves & Surplus: As the company makes profits, they are moved each year from the P/L statement into the balance sheet under the head 'Reserves & Surplus'. Thus, this is also shareholder's money, which they chose to keep in the company and reinvest in the business. While equity may be called contributed capital, reserves and surplus is called retained capital.
Net-worth: Equity Capital and Reserves & Surplus together represent Shareholder's Funds also known as Net-worth or owners' capital.
Long Term Debt: Any debt taken for a period of more than 1 year is considered to be noncurrent liability or a long term loan. This may be in the form of term loans taken from financial institutions or debt securities issued such as debentures.
Current Liabilities: These are liabilities or payments, which have to be made within a year. Salaries, Utility payments, Trade payables, working capital loans, short-term debt raised through the issue of commercial papers, unclaimed dividends, maturing long term debt and others are typical examples of current liabilities. Current liabilities are analysed to determine the efficiency with which the working capital is managed.
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