Give the classification of funds on the basis of ownership.

On the basis of ownership, the sources of finance can be classified into two parts :

1. Owner's funds.

2. Borrowed funds.

Owner's funds :

(a) The funds provided by the owner of an enterprise are known as owner's funds.

(b) These funds remain invested in the business for a longer period of time and are not refunded during the lifetime of the business.

(c) The owners have control over the working of the company and are paid a dividend after the payment of dividend to preference shares.

(d) For example equity shares, retained earnings, etc.

Borrowed funds :

(a) The funds raised through loans or borrowings are known as borrowed funds.

(b) It is a combination of funds that are raised either by the way of credit or loans.

(c) They are permitted to a fixed amount of interest.

(d) Borrowed funds are generally raised by issuing debentures through credit or loans. It is also termed as debt financing.