Financial Guide for SMEs - SME Corporation Malaysia
Financial Guide for SMEs - SME Corporation Malaysia
Financial Guide for SMEs - SME Corporation Malaysia
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<strong>Financial</strong> <strong>Guide</strong> <strong>for</strong> <strong><strong>SME</strong>s</strong>Definitions and ExamplesDEBT EQUITY INTERNAL FINANCEDebt funding can bedefi ned as:Equity fi nance can bedefi ned as:Internal finance can bedefi ned as:Funds or obligationsthat are owed to anexternal party basedon specific terms andconditions.Examples of debtfunding include:•••••••Bank overdraft;Mortgage loan;Fully drawn advance;Commercial bills;Trade creditors,accounts payable;Provisions <strong>for</strong>taxation, employeeentitlements; andShareholder/benefi ciary loans.A <strong>for</strong>m of investmentin the business, fromthe owner, partner orother people willingto take a portion ofownership in thebusiness.Examples of equityfunding include:• Issued shares/share capital(company);• Trust funds;• Partnership capital(partnership);• Owner’s capital(sole proprietor);• Retained/accumulated profits;and• Reserves – capital,profi t/sharepremium/revaluation.(Note: The nature of theinitial capital of an entitywill vary depending onthe structure, e.g. sharecapital is used if it is acompany, trust funds ifit is a trust, partnershipcapital <strong>for</strong> a partnership)Working capital, whichis cash used duringthe operating cycle ofthe business.Examples of workingcapital include:• Cash used topurchaseinventory;• Cash requiredto pay suppliers;and• Cashoutstandingfrom customers.83chapter 7-13 p79-181 Eng.indd 838/15/11 5:02:54 PM
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