Major Resources of Business:
Business resources are the inputs essential to accomplish the preset objectives and to operate business effectively and efficiently. Resources involve productive factors required to undertake activities of the organisation and to achieve desired outcome. These resources, human resources and informational resources.
- Financial Resources
- Physical Resources
- Human Resources
- Informational Resources
The financial resources involve capital or money required for establishment of business and also for day to day business activities. A business organisation can accumulate capital by investing own capital in terms of share and it can also generate capital by borrowing debt or loan.
The major sources of financial resources are:
- Equity Capital: Equity capital is the amount invested by the owner for establishment of business and also for day to day business operation.
- Debt Capital: Debt capital is the amount of funds that are borrowed from banks, financial institution or other organisation.
- Fixed Capital: Fixed capital is is initial investment made in the business. Such capital is required for establishment of business and also for expansion, modernization and diversification of business.
- Working Capital: Working capital is also known as short term capital. Such capital is required for day to day business activities of the organization. Venture capital involves financing additional fund to a new or existing privately owned business by the venture capital firms in exchange of partial ownership of the company
- Mutual Fund: Mutual fund is an investment cycle in which a sum of money is collected from many investors for the purpose of investing in securities such as shares, stocks, bonds, money market instrument and other assets.
- Cloud Funding: Cloud funding is a method of raising capital for a project in small amounts from a large number of people through internet.
The Physical resources involve tangible resources that are necessary for smooth functioning of organizational activities. Such resources involve land, building, machines, equipments, vehicles and other physical properties.
The components of physical resources are land and buildings, machinery and parts, and furniture and fixtures.
- Land and Building: Land and building are tangible and long term assets that are used by the business organizations
- Machines and Parts: Machines and parts are the devices that help to bring some system, easiness and smoothness in organizational activities.
- Furniture and Fixture: Furniture and fixture are important parts of total environment of the organization. They are taken as important facility useful in workplace as to complete organizational activities comfortably.
Human resources involve all the employees from top level to subordinate levels working in the organization. They involve managers, supervisors and subordinate level employees
The common components of human resource involve
- Recruitment: Recruitment is the process of searching out and making effort to attract people who are capable and interested to apply for job vacancies.
- Selection: Selection is the process of choosing candidates having required qualification and competency to fill up jobs in the organization
- Retention: Retention is concerned with maintaining productive employees in the organization for long duration of time.
Informational resources refer to the data and information collected, preserved and used by an organization. They involve information obtains in term of letters, bills, vouchers, agreement, contract, market research paper and other data.
The components of informational resources are
- Internet: Internet is a world-wide interconnected computer network system. It is a globally connected computer network that is linked by routers and servers.
- An Intranet: An intranet is a private network system that is contained within an organization. It is a part of intemet system.
- An extranet: An extranet is a controlled private network that allows access to shareholders, suppliers lenders customers and other authorised persons and instiitutions.
Difference Between Equity Capital and Debit Capital
|Basis For Comparison||Equity Capital||Debt Capital|
|Meaning||Funds raised by the company by issuing shares are known as equity capital||Funds owed by the company towards another party is known as debt capital|
|Short of fund||Equity is owned fund. It reflects the capital owned by the company||Debt is the borrowed fund. It reflects money owed by the company towards another person.|
|Term||It long term investment. Equity can be kept for a long period.||It is Comparatively short term loan investment. Debt can be kept for limited period and should be repaid back after the expiry of that term.|
|Status of holders||Equity reflects the capital owned by the company. So, the status of holder is as proprietors.||Debt reflects money owed by the company towards another person or entity. So, status of holders is as lenders.|
|Risk||Investment in equity shares is the risky one as in the event of winding up of the company, they will be paid at the end after the debt of all the other stakeholders is cleared. So, it is high risk.||Debt requires guaranteeing of an assets as security so that if the money is not paid back with in a reasonable time, the lender can forfeit the asset and recover the money. So, risk is less.|
|Forms of Capital||Equity can be in the form of shares and stock. it comprises of ordinary shares, preference shares, and reserve and surplus.||Debt can in the form of term loans, debentures and bonds.|
|Return||The return on equity is called as a divident which is an appropriation of profit. And nature of return is variable and irregular.||Return on debt is known as interest which is a charge against profit. And the nature of return is fixed and regular.|
|Collateral||Not Required||Essential for secure loans.|