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| 1. |
Difference between borrowed fund and owners fund |
| Answer» Owner capital :1. Meaning : Consist of the amount contributed by owners and their profit reinvested in business.2. Permanent : It remains permanent invested.3. Risk : It carries risk of business.4. Control :Control rests with providers of owners capital.5. Security : It does not require any asset as security.6. reward : Reward is dividend.7. Priority : Reward is paid after payment of interest on borrowed funds.8. Nature of return : The rate of dividend may fluctuate year to year.Borrowed capital :1. Meaning : It includes funds available in the form of loans or credit2. Permanent : It is not permanent source of investment.3. Risk : The debts of company are secured.4. Control : No control rests with providers of borrowed funds.5. Security : It is backed by security of assets.6. reward : Reward is interest.7. Priority : Payment of interest gets priority over payment of dividend.8. Nature of return : The rate of interest is fixed on funds.\xa0 | |