In the
lecture, let us understand about crossing of cheque and different kinds of crossing .
So what is crossing of
cheque?
This is nothing but drawing two parallel lines on the face of the cheque. By crossing you are giving instruction to the banker not to
pay the cheque by cash but you are directing to pay the money only through bank account or to the credit of the account of the customer.
To know more and understand about types of crossing, watch this lecture:
Imagine a normal sale scenario where the buyer and seller are involved. The buyer would make the cash payment first then the seller would be dispatching the goods. This would generally happen when the buyer has cash at his disposal. But imagine a scenario where buyer does not have cash but in need of goods and seller not ready to give credit just by looking the face of the buyer. There comes the role of letter of credit. In order to understand the letter of credit we should understand all the three parties involved. Party 1 - Seller Party 2 - Buyer Part 3 - Banker Continue with this video Lecture to understand in depth:
What is the difference between Debt and Equity?
Let's say you want to start a business and cost of business $100Mn.
For this you have to raise $100 Mn and then only you can use them.(for purchase of various assets like Land & Building, Plant & Machinery, Furniture & Fixtures, etc).
Let me break that -
Land & Building $50Mn
Plant & Machinery $50Mn --------------------------------------- Total $100Mn ---------------------------------------
From where you got funds for buying these assets?
Is it from Owners or from outsiders?
In business, you can raise money from Owners as well as from Outsiders.
Bank Loan are outsiders money.
Debentures are outsiders money.
Suppliers credit is outsiders money.
It means you are borrowing from outsiders for funding your assets.
Owners when they invest, it will be called as Share Capital. It is direct contribution by owners.
If business makes profit and owners doesn't take them home and allows them to be reinvested into business, then they are making indirect contribution.
Owners money will be called as Equity.
Outsiders money will be called as Debt.
Business needs can be funded in combination.
To know more, watch this lecture.
Note: This lecture is part of my Online course
FINANCIAL MANAGEMENT A COMPLETE STUDY https://www.instamojo.com/caraja/financial-management-a-complete-study-online/
