Financial assistance

1. FinancialAssistance/Aid

2. Introduction
The sources of finance available to our hotel
development are similar to those available to Real
estate developers of other kinds of projects
It is necessary to have a separate source of finance
during the construction period, which could be
replaced by permanent financing when the hotel
is opened
The sources of finance in tourism come from
potential local investors, State Agencies, or
leading Institutions
The tourism programs adopted by the state help to
ensure potential investors at it will create a market
and international tourists will come and fill up the

3. The industry requires three types of finance
1. Long-term Finance: The investment in land
and physical capacity is a major head of
expenditure requiring long-term finance for
hotel projects
2. Medium-term Finance: The expenditure on
equipment, furnishing, and largescale
decoration, etc. require medium-term finance
3. Short-term Finance: It is required to meet
operating costs, the cost of redecorating, and
renovation, etc.

4. Major sources of capital
 Equity :Equity refers to the shareholder's
funds
Debt : consists of term loans, debentures, and
short term borrowings.

5. What Is Capital?
• Capital is a broad term that can describe anything
that confers value or benefit to its owner, such as
a factory and its machinery, intellectual property
like patents, or the financial assets of a business
or an individual
• While money itself may be construed as capital
is, capital is more often associated with cash that
is being put to work for productive or investment
purposes
• In general, capital is a critical component of
running a business from day to day and financing
its future growth. Business capital may derive
from the operations of the business or be raised

6. What Is Capital?
• When budgeting, businesses of all kinds
typically focus on three types of capital:
1.working capital,
2.equity capital,
3.debt capital
A business in the financial industry identifies
trading capital as a fourth component.

7. Authorized/Nominal/Registered Capital
At the time of registration of a company, the
Memorandum of Association mentions the amount of
capital a company is authorized to raise from the public
by selling shares which is known as Authorized Capital
or Normal Capital or Registered Capital
It is the maximum amount of share capital that a
company can issue. In the case of a limited company,
the Memorandum shall contain the amount of Capital
by which a company is proposed to be registered and
the division thereof into shares of fixed amount
In short, it is the maximum amount of capital which a
company will have during its lifetime—unless it is
increased.

8. Issued Capital
• Generally, a part of the authorized capital is
issued to the public for subscription which is
known as issued capital, i.e., it is the nominal
value of the shares which are offered to the
public for subscription
• Usually, a company does not issue all its
capital at a time, i.e., issued capital is less than
the authorized capital. If all shares are issued,
issued capital and authorized capital will be
the same

9. Subscribed Capital
A part of the issued capital which is subscribed
by the public is known as subscribed capital
It does not necessarily mean that all the shares
which have been issued will be taken over by
the public
In other words, the share capital of the number
of shares which are taken over by the public is
called subscribed capital, i.e., the portion of
issued share capital which is paid/subscribed
by the shareholder is known as subscribed
capital.

10. Called-Up Capital
Generally, the shareholders pay the price of the
shares by installments, viz., application,
allotment, First call, Final call etc
Therefore, the portion of the face value of the
shares which the shareholders are called upon
to pay or the company has demanded to pay is
called Called-up capital

11. Uncalled Capital
The unpaid portion of the subscribed capital is
called Uncalled Capital
In other words, it is the remainder of the issued
Capital which has not been called
However, the company may call this amount at
any time but that must be subject to the terms
of issue of shares.

12. Paid Up Capital
• The amount actually paid by the shareholders
is known as Paid-up Capital.

13. Reserve Capital
According to Sec. 99 of the Companies Act,
1956, Reserve Capital is that part of uncalled
capital of a company which can be called only
in the event of its winding-up
A limited company may, by special resolution,
determine that any portion of its share capital
which has not been called-up, shall be called
up, except in the event of the company being
wound-up, such capital is known as Reserve
Capital. It is available only for the creditors on
the winding-up of the company

14. Capital Asset
• For businesses, a capital asset is an asset with
a useful life longer than a year that is not
intended for sale in the regular course of the
business's operation
• This also makes it a type of production cost.
For example, if one company buys a computer
to use in its office, the computer is a capital
asset
• If another company buys the same computer
to sell, it is considered inventory.

15. SOURCES OF LONG-TERM FINANCE

16. EQUITY(ORDINARY) SHARE CAPITAL
According to companies act, “equity share
capital' refers to all share capital which is not
preference share capital
Equity shareholders have the last claim on
divisible profits after the commitment to the
preference shareholders
Equity share holders receive dividends out of
profits as recommended by the Company & as
declared by the shareholders in an annual
general meeting (After due consideration to
depreciation & after dividend on preference

17. EQUITY(ORDINARY) SHARE CAPITAL
• The principal advantage obtaining finance through this
source is that there is no compulsion on payment on
dividends
• If the company does not have not have sufficient cash
flow, then it can skip the payment of dividends without
any legal complications.
• The amount of equity share capital enhances the
creditworthiness of the Company.
• The disadvantage associated with this source is that the
sale of equity shares to outsiders dilute control of
existing owners.
• The cost of equity capital is the highest & the investors
also assume greater amount of risk and therefore

18. SWEAT EQUITY SHARES
Are equity shares given to company's employee
in recognition of their work
The Company may proceed with the issue of
sweat equity shares if the issue is authorized
by a special resolution passed by the Co. in the
general meetings

19. PREFERENCE SHARE CAPITAL
A preference share has a preference in regard to
payment of dividend and preferential right of
the repayment of capital in the event of
winding up of company
The payment of dividend on preference shares
may be cumulative or non-cumulative

20. Types of preference share
1.PARTICIPATING & NON-PARTICIPATING
2.CUMULATIVE & NON-CUMULATIVE
3.REDEEMABLE & IRREDEEMABLE
The voting right of preference shareholders are
restricted
An equity shareholder can vote on all matters
affecting the Company but a preference e share
holder can vote only when his special rights as
a preference shareholder are being varied or
their dividend is in arrears.