PROJECT REPORT

ON

SOURCE OF FINANCE

KALINGA INSTITUTE OF SOCIAL SCIENCES

SUBMITTED IN PARTIAL FULFILLMENT OF THE DEGREE OF

MBA IN SEMESTER FORTH OF PUNJABI UNIVERSITY

PATIALA

Under the supervision: SUBMITTED BY:

Dr. Maninder Lakhwinder Singh

MBA 4th Sem

Roll No. 1889

SWIFT GROUP OF COLLEGS

AFFILIATED TO PUNJABI UNIVERSITY, PATIALA

ACADEMIC SESSION (2016-2017)

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 DECLARATION

I, Lakhwinder have completed the project titled Source Of Finance of Kalinga

Institute of Social Science under the guidance of Dr. Maninder in partial
fulfillment of the requirement for the award of degree of Masters of Business
Administration. This is an original piece of work and I have neither copied nor
submitted it earlier elsewhere.

Lakhwinder Singh

MBA 4th Sem.

Roll No. 1889

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 ACKNOWLEDGEMENT

It is my pleasant privilege to express my heartiest gratitude and indebtedness to those who have
assisted me towards the completion of my project report. The project wouldnt have seen the
light of day without the help and guidance of many people. I take an opportunity to convey my
deepest gratitude to all those individuals.

I would like to thank my project guide Dr. Maninder for providing the necessary facilities
required for completion of this project.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

I would like to thank my Asst. Prof. _______________, who has supported me with the valuable
insights into completion of this project. Their unforgettable, positive approach and freehand
acumen made this project possible

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 CERTIFICATE

This it certify that the survey, Source Of Finance of Kalinga Institute of Social

Science submitted in the partial fulfillment of the requirement for the award of

degree of MBA 4th Sem. from Punjabi University, Patiala is a bonafide project

work carried out by Lakhiwinder Singh under my supervision and guidance

and to the best of my knowledge and information, no part of project work has been

submitted for any other degree.

Signature

Dr. Maninder

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 TABLE OF CONTENTS

S No. Contents Page No.

1 Introduction to Topic 1-19
2 Company Profile (KISS) 20-39
Overview
Genesis
Uniqueness of KISS
Infrastructure of KISS
Financial Management of KISS
KIIT Overview
KIIT at a Glance
3 Objective of the study 40
4 Research Methodology 41-43
Types of Research design
Data Collection Method
Type of Data used in the study
5 Review of Literature 44-46
6 Need of the study 47
7 Limitation of the study 48
8 Suggestions 49
9 Conclusion 50
10 Bibliography 51

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 CHAPTER-I
INTRODUCTION TO
TOPIC

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 INTRODUCTION

There are various sources of finance such as equity, debt, debentures, retained earnings, term
loans, working capital loans, letter of credit, euro issue, venture funding etc. These sources are
useful in different situations. They are classified based on time period, ownership and control,
and their source of generation.

Sources of finance are the most explored area especially for the entrepreneurs about to start a
new business. It is perhaps the toughest part of all the efforts. There are various sources of
finance classified based on time period, ownership and control, and source of generation of
finance.

Having known that there are many alternatives of finance or capital, a company can choose from.
Choosing right source and the right mix of finance is a key challenge for every finance manager.
The process of selecting right source of finance involves in-depth analysis of each and every
source of finance. For analyzing and comparing the sources of finance, it is required to
understand all characteristics of the financing sources. There are many characteristics on the
basis of which sources of finance are classified.

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On the basis of a time period, sources are classified into long term, medium term, and short term.
Ownership and control classify sources of finance into owned capital and borrowed capital.
Internal sources and external sources are the two sources of generation of capital. All the sources
of capital have different characteristics to suit different types of requirements. Lets understand
them in a little depth.

ACCORDING TO TIME-PERIOD

Sources of financing a business are classified based on the time period for which the money is
required. Time period is commonly classified into following three:

LONG TERM SOURCES OF FINANCE

Long-term financing means capital requirements for a period of more than 5 years to 10, 15, 20
years or maybe more depending on other factors. Capital expenditures in fixed assets like plant
and machinery, land and building etc of a business are funded using long-term sources of
finance. Part of working capital which permanently stays with the business is also financed with
long-term sources of finance. Long term financing sources can be in form of any of them:

Share Capital or Equity Shares

Preference Capital or Preference Shares

Retained Earnings or Internal Accruals

Debenture / Bonds

Term Loans from Financial Institutes, Government, and Commercial Banks

Venture Funding

Asset Securitization

International Financing by way of Euro Issue, Foreign Currency Loans, ADR, GDR
etc.

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MEDIUM TERM SOURCES OF FINANCE

Medium term financing means financing for a period of 3 to 5 years. Medium term financing is
used generally for two reasons. One, when long-term capital is not available for the time being
and second, when deferred revenue expenditures like advertisements are made which are to be
written off over a period of 3 to 5 years. Medium term financing sources can in the form of one
of them:

Preference Capital or Preference Shares

Debenture / Bonds

Medium Term Loans from

Financial Institutes

Government, and

Commercial Banks

Lease Finance

Hire Purchase Finance

SHORT TERM SOURCES OF FINANCE

Short term financing means financing for a period of less than 1 year. Need for short term
finance arises to finance the current assets of a business like an inventory of raw material and
finished goods, debtors, minimum cash and bank balance etc. Short term financing is also named
as working capital financing. Short term finances are available in the form of:

Trade Credit

Short Term Loans like Working Capital Loans from Commercial Banks

Fixed Deposits for a period of 1 year or less

Advances received from customers

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 Creditors

Payables

Factoring Services

Bill Discounting etc.

OBJECTIVES

An introduction to the different sources of finance available to management, both

internal and external
An overview of the advantages and disadvantages of the different sources of
funds
An understanding of the factors governing the choice between different sources of funds.

Structure of the chapter

This final chapter starts by looking at the various forms of "shares" as a means to raise new
capital and retained earnings as another source. However, whilst these may be "traditional" ways
of raising funds, they are by no means the only ones. There are many more sources available to
companies who do not wish to become "public" by means of share issues. These alternatives
include bank borrowing, government assistance, venture capital and franchising. All have their
own advantages and disadvantages and degrees of risk attached.

Sources of funds

A company might raise new funds from the following sources:

The capital markets:

i) new share issues, for example, by companies acquiring a stock market listing for the first time

ii) rights issues

Loan stock

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 Retained earnings

Bank borrowing

Government sources

Business expansion scheme funds

Venture capital

Franchising.

Ordinary (equity) shares

Ordinary shares are issued to the owners of a company. They have a nominal or 'face' value,
typically of $1 or 50 cents. The market value of a quoted company's shares bears no relationship
to their nominal value, except that when ordinary shares are issued for cash, the issue price must
be equal to or be more than the nominal value of the shares.

Deferred ordinary shares

are a form of ordinary shares, which are entitled to a dividend only after a certain date or if
profits rise above a certain amount. Voting rights might also differ from those attached to other
ordinary shares.

Ordinary shareholders put funds into their company:

a) by paying for a new issue of shares

b) through retained profits.

Simply retaining profits, instead of paying them out in the form of dividends, offers an
important, simple low-cost source of finance, although this method may not provide enough
funds, for example, if the firm is seeking to grow.

A new issue of shares might be made in a variety of different circumstances:

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a) The company might want to raise more cash. If it issues ordinary shares for cash, should the
shares be issued pro rata to existing shareholders, so that control or ownership of the company is
not affected? If, for example, a company with 200,000 ordinary shares in issue decides to issue
50,000 new shares to raise cash, should it offer the new shares to existing shareholders, or should
it sell them to new shareholders instead?
i) If a company sells the new shares to existing shareholders in proportion to their existing
shareholding in the company, we have a rights issue. In the example above, the 50,000 shares
would be issued as a one-in-four rights issue, by offering shareholders one new share for every
four shares they currently hold.

ii) If the number of new shares being issued is small compared to the number of shares already in
issue, it might be decided instead to sell them to new shareholders, since ownership of the
company would only be minimally affected.

b) The company might want to issue shares partly to raise cash, but more importantly to float' its
shares on a stick exchange.

c) The company might issue new shares to the shareholders of another company, in order to take
it over.

New shares issues

A company seeking to obtain additional equity funds may be:

a) An unquoted company wishing to obtain a Stock Exchange quotation

b) An unquoted company wishing to issue new shares, but without obtaining a Stock Exchange
quotation

c) A company which is already listed on the Stock Exchange wishing to issue additional new
shares.

The methods by which an unquoted company can obtain a quotation on the stock market are:

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 c) an offer for sale
d) a prospectus issue
e) a placing
f) An introduction.

An offer for sale is a means of selling the shares of a company to the public.

a) An unquoted company may issue shares, and then sell them on the Stock Exchange, to raise
cash for the company. All the shares in the company, not just the new ones, would then become
marketable.

b) Shareholders in an unquoted company may sell some of their existing shares to the general
public. When this occurs, the company is not raising any new funds, but just providing a wider
market for its existing shares (all of which would become marketable), and giving existing
shareholders the chance to cash in some or all of their investment in their company.

When companies 'go public' for the first time, a 'large' issue will probably take the form of an
offer for sale. A smaller issue is more likely to be a placing, since the amount to be raised can be
obtained more cheaply if the issuing house or other sponsoring firm approaches selected
institutional investors privately.

Rights issues

A rights issue provides a way of raising new share capital by means of an offer to existing
shareholders, inviting them to subscribe cash for new shares in proportion to their existing
holdings.

For example, a rights issue on a one-for-four basis at 280c per share would mean that a company
is inviting its existing shareholders to subscribe for one new share for every four shares they
hold, at a price of 280c per new share.

A company making a rights issue must set a price which is low enough to secure the acceptance
of shareholders, who are being asked to provide extra funds, but not too low, so as to avoid
excessive dilution of the earnings per share.

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Preference shares

Preference shares have a fixed percentage dividend before any dividend is paid to the ordinary
shareholders. As with ordinary shares a preference dividend can only be paid if sufficient
distributable profits are available, although with 'cumulative' preference shares the right to an
unpaid dividend is carried forward to later years. The arrears of dividend on cumulative
preference shares must be paid before any dividend is paid to the ordinary shareholders.

From the company's point of view, preference shares are advantageous in that:

Dividends do not have to be paid in a year in which profits are poor, while this is not the
case with interest payments on long term debt (loans or debentures).
Since they do not carry voting rights, preference shares avoid diluting the control of
existing shareholders while an issue of equity shares would not.
Unless they are redeemable, issuing preference shares will lower the company's gearing.
Redeemable preference shares are normally treated as debt when gearing is calculated.
The issue of preference shares does not restrict the company's borrowing power, at least
in the sense that preference share capital is not secured against assets in the business.
The non-payment of dividend does not give the preference shareholders the right to
appoint a receiver, a right which is normally given to debenture holders.

However, dividend payments on preference shares are not tax deductible in the way that interest
payments on debt are. Furthermore, for preference shares to be attractive to investors, the level of
payment needs to be higher than for interest on debt to compensate for the additional risks.

For the investor, preference shares are less attractive than loan stock because:

They cannot be secured on the company's assets

The dividend yield traditionally offered on preference dividends has been much too low to
provide an attractive investment compared with the interest yields on loan stock in view of the
additional risk involved.

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Loan stock

Loan stock is long-term debt capital raised by a company for which interest is paid, usually half
yearly and at a fixed rate. Holders of loan stock are therefore long-term creditors of the company.

Loan stock has a nominal value, which is the debt owed by the company, and interest is paid at a
stated "coupon yield" on this amount. For example, if a company issues 10% loan stocky the
coupon yield will be 10% of the nominal value of the stock, so that $100 of stock will receive
$10 interest each year. The rate quoted is the gross rate, before tax.

Debentures are a form of loan stock, legally defined as the written acknowledgement of a debt
incurred by a company, normally containing provisions about the payment of interest and the
eventual repayment of capital.

Debentures with a floating rate of interest

These are debentures for which the coupon rate of interest can be changed by the issuer, in
accordance with changes in market rates of interest. They may be attractive to both lenders and
borrowers when interest rates are volatile.

Security

Loan stock and debentures will often be secured. Security may take the form of either a fixed
charge or a floating charge.

a) Fixed charge; Security would be related to a specific asset or group of assets, typically land
and buildings. The company would be unable to dispose of the asset without providing a
substitute asset for security, or without the lender's consent.

b) Floating charge; With a floating charge on certain assets of the company (for example, stocks
and debtors), the lender's security in the event of a default payment is whatever assets of the
appropriate class the company then owns (provided that another lender does not have a prior
charge on the assets). The company would be able, however, to dispose of its assets as it chose

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until a default took place. In the event of a default, the lender would probably appoint a receiver
to run the company rather than lay claim to a particular asset.

The redemption of loan stock

Loan stock and debentures are usually redeemable. They are issued for a term of ten years or
more, and perhaps 25 to 30 years. At the end of this period, they will "mature" and become
redeemable (at par or possibly at a value above par).

Most redeemable stocks have an earliest and latest redemption date. For example, 18%
Debenture Stock 2007/09 is redeemable, at any time between the earliest specified date (in 2007)
and the latest date (in 2009). The issuing company can choose the date. The decision by a
company when to redeem a debt will depend on:

a) How much cash is available to the company to repay the debt

b) The nominal rate of interest on the debt. If the debentures pay 18% nominal interest and
the current rate of interest is lower, say 10%, the company may try to raise a new loan at
10% to redeem the debt which costs 18%. On the other hand, if current interest rates are
20%, the company is unlikely to redeem the debt until the latest date possible, because
the debentures would be a cheap source of funds.

There is no guarantee that a company will be able to raise a new loan to pay off a maturing debt,
and one item to look for in a company's balance sheet is the redemption date of current loans, to
establish how much new finance is likely to be needed by the company, and when.

Mortgages are a specific type of secured loan. Companies place the title deeds of freehold or
long leasehold property as security with an insurance company or mortgage broker and receive
cash on loan, usually repayable over a specified period. Most organizations owning property
which is unencumbered by any charge should be able to obtain a mortgage up to two thirds of the
value of the property.

As far as companies are concerned, debt capital is a potentially attractive source of finance
because interest charges reduce the profits chargeable to corporation tax.

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Retained earnings

For any company, the amount of earnings retained within the business has a direct impact on the
amount of dividends. Profit re-invested as retained earnings is profit that could have been paid as
a dividend. The major reasons for using retained earnings to finance new investments, rather than
to pay higher dividends and then raise new equity for the new investments, are as follows:

a) The management of many companies believes that retained earnings are funds which do not
cost anything, although this is not true. However, it is true that the use of retained earnings as a
source of funds does not lead to a payment of cash.

b) The dividend policy of the company is in practice determined by the directors. From their
standpoint, retained earnings are an attractive source of finance because investment projects can
be undertaken without involving either the shareholders or any outsiders.

c) The use of retained earnings as opposed to new shares or debentures avoids issue costs.

d) The use of retained earnings avoids the possibility of a change in control resulting from an
issue of new shares.

Another factor that may be of importance is the financial and taxation position of the company's
shareholders. If, for example, because of taxation considerations, they would rather make a
capital profit (which will only be taxed when shares are sold) than receive current income, then
finance through retained earnings would be preferred to other methods.

A company must restrict its self-financing through retained profits because shareholders should
be paid a reasonable dividend, in line with realistic expectations, even if the directors would
rather keep the funds for re-investing. At the same time, a company that is looking for extra
funds will not be expected by investors (such as banks) to pay generous dividends, nor over-
generous salaries to owner-directors.

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Bank lending

Borrowings from banks are an important source of finance to companies. Bank lending is still
mainly short term, although medium-term lending is quite common these days.

Short term lending may be in the form of:

a) An overdraft, which a company should keep within a limit set by the bank. Interest is charged
(at a variable rate) on the amount by which the company is overdrawn from day to day;

b) A short-term loan, for up to three years.

Medium-term loans are loans for a period of from three to ten years. The rate of interest charged
on medium-term bank lending to large companies will be a set margin, with the size of the
margin depending on the credit standing and riskiness of the borrower. A loan may have a fixed
rate of interest or a variable interest rate, so that the rate of interest charged will be adjusted
every three, six, nine or twelve months in line with recent movements in the Base Lending Rate.

Lending to smaller companies will be at a margin above the bank's base rate and at either a
variable or fixed rate of interest. Lending on overdraft is always at a variable rate. A loan at a
variable rate of interest is sometimes referred to as a floating rate loan. Longer-term bank loans
will sometimes be available, usually for the purchase of property, where the loan takes the form
of a mortgage. When a banker is asked by a business customer for a loan or overdraft facility, he
will consider several factors, known commonly by the mnemonic PARTS.

- Purpose
- Amount
- Repayment
- Term
- Security

P The purpose of the loan A loan request will be refused if the purpose of the loan is not
acceptable to the bank.
A The amount of the loan. The customer must state exactly how much he wants to borrow. The

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 banker must verify, as far as he is able to do so, that the amount required to make the proposed
investment has been estimated correctly.
R How will the loan be repaid? Will the customer be able to obtain sufficient income to make the
necessary repayments?
T What would be the duration of the loan? Traditionally, banks have offered short-term loans
and overdrafts, although medium-term loans are now quite common.
S Does the loan require security? If so, is the proposed security adequate?

Leasing

A lease is an agreement between two parties, the "lessor" and the "lessee". The lessor owns a
capital asset, but allows the lessee to use it. The lessee makes payments under the terms of the
lease to the lessor, for a specified period of time.

Leasing is, therefore, a form of rental. Leased assets have usually been plant and machinery, cars
and commercial vehicles, but might also be computers and office equipment. There are two basic
forms of lease: "operating leases" and "finance leases".

Operating leases

Operating leases are rental agreements between the lesser and the lessee whereby:

a) The lesser supplies the equipment to the lessee

b) The lesser is responsible for servicing and maintaining the leased equipment

c) The period of the lease is fairly short, less than the economic life of the asset, so that at the end
of the lease agreement, the lesser can either

i) Lease the equipment to someone else, and obtain a good rent for it, or

ii) Sell the equipment secondhand.

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Finance leases

Finance leases are lease agreements between the user of the leased asset (the lessee) and a
provider of finance (the lesser) for most, or all, of the asset's expected useful life.

Suppose that a company decides to obtain a company car and finance the acquisition by means of
a finance lease. A car dealer will supply the car. A finance house will agree to act as lessor in a
finance leasing arrangement, and so will purchase the car from the dealer and lease it to the
company. The company will take possession of the car from the car dealer, and make regular
payments (monthly, quarterly, six monthly or annually) to the finance house under the terms of
the lease.

Other important characteristics of a finance lease:

a) The lessee is responsible for the upkeep, servicing and maintenance of the asset. The lessor is
not involved in this at all.

b) The lease has a primary period, which covers all or most of the economic life of the asset. At
the end of the lease, the lessor would not be able to lease the asset to someone else, as the asset
would be worn out. The lessor must, therefore, ensure that the lease payments during the primary
period pay for the full cost of the asset as well as providing the lessor with a suitable return on
his investment.

c) It is usual at the end of the primary lease period to allow the lessee to continue to lease the
asset for an indefinite secondary period, in return for a very low nominal rent. Alternatively, the
lessee might be allowed to sell the asset on the lessor's behalf (since the lessor is the owner) and
to keep most of the sale proceeds, paying only a small percentage (perhaps 10%) to the lessor.

Why might leasing be popular

The attractions of leases to the supplier of the equipment, the lessee and the lessor are as follows:

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 The supplier of the equipment is paid in full at the beginning. The equipment is sold to
the lessor, and apart from obligations under guarantees or warranties, the supplier has no
further financial concern about the asset.
The lessor invests finance by purchasing assets from suppliers and makes a return out of
the lease payments from the lessee. Provided that a lessor can find lessees willing to pay
the amounts he wants to make his return, the lessor can make good profits. He will also
get capital allowances on his purchase of the equipment.
Leasing might be attractive to the lessee:

i) if the lessee does not have enough cash to pay for the asset, and would have difficulty
obtaining a bank loan to buy it, and so has to rent it in one way or another if he is to have the use
of it at all; or

ii) if finance leasing is cheaper than a bank loan. The cost of payments under a loan might
exceed the cost of a lease.

Operating leases have further advantages:

The leased equipment does not need to be shown in the lessee's published balance sheet,
and so the lessee's balance sheet shows no increase in its gearing ratio.
The equipment is leased for a shorter period than its expected useful life. In the case of
high-technology equipment, if the equipment becomes out-of-date before the end of its
expected life, the lessee does not have to keep on using it, and it is the lessor who must
bear the risk of having to sell obsolete equipment secondhand.

The lessee will be able to deduct the lease payments in computing his taxable profits.

Hire purchase

Hire purchase is a form of installment credit. Hire purchase is similar to leasing, with the
exception that ownership of the goods passes to the hire purchase customer on payment of the
final credit installment, whereas a lessee never becomes the owner of the goods.

Hire purchase agreements usually involve a finance house.

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 ii) The supplier sells the goods to the finance house.
iii) The supplier delivers the goods to the customer who will eventually purchase
them.
iv) The hire purchase arrangement exists between the finance house and the
customer.

The finance house will always insist that the hirer should pay a deposit towards the purchase
price. The size of the deposit will depend on the finance company's policy and its assessment of
the hirer. This is in contrast to a finance lease, where the lessee might not be required to make
any large initial payment.

An industrial or commercial business can use hire purchase as a source of finance. With
industrial hire purchase, a business customer obtains hire purchase finance from a finance house
in order to purchase the fixed asset. Goods bought by businesses on hire purchase include
company vehicles, plant and machinery, office equipment and farming machinery.

Government assistance

The government provides finance to companies in cash grants and other forms of direct
assistance, as part of its policy of helping to develop the national economy, especially in high
technology industries and in areas of high unemployment. For example, the Indigenous Business
Development Corporation of Zimbabwe (IBDC) was set up by the government to assist small
indigenous businesses in that country.

Venture capital

Venture capital is money put into an enterprise which may all be lost if the enterprise fails. A
businessman starting up a new business will invest venture capital of his own, but he will
probably need extra funding from a source other than his own pocket. However, the term
'venture capital' is more specifically associated with putting money, usually in return for an
equity stake, into a new business, a management buy-out or a major expansion scheme.

22
The institution that puts in the money recognises the gamble inherent in the funding. There is a
serious risk of losing the entire investment, and it might take a long time before any profits and
returns materialize. But there is also the prospect of very high profits and a substantial return on
the investment. A venture capitalist will require a high expected rate of return on investments, to
compensate for the high risk.

A venture capital organisation will not want to retain its investment in a business indefinitely,
and when it considers putting money into a business venture, it will also consider its "exit", that
is, how it will be able to pull out of the business eventually (after five to seven years, say) and
realise its profits. Examples of venture capital organisations are: Merchant Bank of Central
Africa Ltd and Anglo American Corporation Services Ltd.

When a company's directors look for help from a venture capital institution, they must recognise
that:

the institution will want an equity stake in the company

it will need convincing that the company can be successful

it may want to have a representative appointed to the company's board, to look after its
interests.

The directors of the company must then contact venture capital organisations, to try and find one
or more which would be willing to offer finance. A venture capital organisation will only give
funds to a company that it believes can succeed, and before it will make any definite offer, it will
want from the company management:

a) a business plan

b) details of how much finance is needed and how it will be used

c) the most recent trading figures of the company, a balance sheet, a cash flow forecast and a
profit forecast

d) details of the management team, with evidence of a wide range of management skills

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e) details of major shareholders

f) details of the company's current banking arrangements and any other sources of finance

g) any sales literature or publicity material that the company has issued.

A high percentage of requests for venture capital are rejected on an initial screening, and only a
small percentage of all requests survive both this screening and further investigation and result in
actual investments.

Franchising

Franchising is a method of expanding business on less capital than would otherwise be needed.
For suitable businesses, it is an alternative to raising extra capital for growth. Franchisors include
Budget Rent-a-Car, Wimpy, Nando's Chicken and Chicken Inn.

Under a franchising arrangement, a franchisee pays a franchisor for the right to operate a local
business, under the franchisor's trade name. The franchisor must bear certain costs (possibly for
architect's work, establishment costs, legal costs, marketing costs and the cost of other support
services) and will charge the franchisee an initial franchise fee to cover set-up costs, relying on
the subsequent regular payments by the franchisee for an operating profit. These regular
payments will usually be a percentage of the franchisee's turnover.

Although the franchisor will probably pay a large part of the initial investment cost of a
franchisee's outlet, the franchisee will be expected to contribute a share of the investment
himself. The franchisor may well help the franchisee to obtain loan capital to provide his-share
of the investment cost.

The advantages of franchises to the franchisor are as follows:

The capital outlay needed to expand the business is reduced substantially.

The image of the business is improved because the franchisees will be motivated to achieve
good results and will have the authority to take whatever action they think fit to improve the
results.

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 The advantage of a franchise to a franchisee is that he obtains ownership of a business for an
agreed number of years (including stock and premises, although premises might be leased from
the franchisor) together with the backing of a large organisation's marketing effort and
experience. The franchisee is able to avoid some of the mistakes of many small businesses,
because the franchisor has already learned from its own past mistakes and developed a scheme
that works.

Sources of finance

Outdoor Living Ltd., an owner-managed company, has developed a new type of heating using
solar power, and has financed the development stages from its own resources. Market research
indicates the possibility of a large volume of demand and a significant amount of additional
capital will be needed to finance production.

Advise Outdoor Living Ltd. on:

a) the advantages and disadvantages of loan or equity capital

b) the various types of capital likely to be available and the sources from which they might be
obtained

c) the method(s) of finance likely to be most satisfactory to both Outdoor Living Ltd. and the
provider of funds.

Advantages and disadvantages

Finance can sometimes be more appropriate than other sources of finance, eg bank loans, but it
can place different demands on you and your business.

The main advantages of finance are:

The funding is committed to your business and your intended projects. Investors only realise
their investment if the business is doing well, eg through stock market flotation or a sale to new
investors.

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 You will not have to keep up with costs of servicing bank loans or debt finance, allowing you to
use the capital for business activities.

Outside investors expect the business to deliver value, helping you explore and execute growth
ideas.

Some business angels and venture capitalists can bring valuable skills, contacts and experience to
your business. They can also assist with strategy and key decision making.

Like you, investors have a vested interest in the business' success, ie its growth, profitability and
increase in value.

Investors are often prepared to provide follow-up funding as the business grows.

The principal disadvantages of finance are:

Raising equity finance is demanding, costly and time consuming, and may take management
focus away from the core business activities.

Potential investors will seek comprehensive background information on you and your business.
They will look carefully at past results and forecasts and will probe the management team. Many
businesses find this process useful, regardless of whether or not any fundraising is successful.

Depending on the investor, you will lose a certain amount of your power to make management
decisions.

You will have to invest management time to provide regular information for the investor to
monitor.

At first you will have a smaller share in the business - both as a percentage and in absolute
monetary terms. However, your reduced share may become worth a lot more in absolute
monetary terms if the investment leads to your business becoming more successful.

There can be legal and regulatory issues to comply with when raising finance, eg when
promoting investments.

26
 CHAPTER-II
COMPANY PROFILE

27
 COMPANY PROFILE
Overview

Started with just 125 tribal students in 1993, Kalinga Institute of Social Sciences (KISS) has
today grown into the largest free residential institute for indigenous (tribal) children. KISS
provides holistic education from Kindergarten to Postgraduation (KG to PG), vocational training,
food, accommodation, health care and all other bzasic necessities of life to 25,000 indigenous
(tribal) children of the poorest of the poor background absolutely free. Students are enrolled
from 62 indigenous communities (tribes) of Odisha, of which 13 are classified as
primitive. There are some students from adjoining States as well.
The Institute plans to educate 2,00,000 poor indigenous (tribal) children over the next decade. To
achieve this goal, it has set up or is in the process of setting up branches in 10 states, with the
support of respective state governments, and all 30 districts of Odisha. Achievements of KISS
students in examinations and other academic events speak volumes about high quality of
education at the institute. KISS students, many of whom are first generation learners, have been
achieving cent percent pass record in the final grade examinations for more than 10 years in a
row. They have been representing State in the prestigious National Children's Science Congress
every year since 2005. An indigenous (tribal) boy from the institute represented India in the
Malala Day United Nations Youth Assembly at the United Nations Headquarters in New York in
2013. The students have also secured admissions in prestigious national-level institutes like
NITs, IITs and IIMs, and bagged job offers from top companies like Accenture, TCS and Wipro.
The course curriculum of the Institute is unique, for it incorporates vocational training with
formal education, thus helping a child grow up educated as well as self-sufficient. Various
activities are designed to help indigenous (tribal) children be rooted to their culture and tradition
and remain integrated to their society. Students of KISS have proved their mettle not only in
academics, but also in sports and cultural activities. Highpoints of these achievements have been
their becoming Champion in Under 13 International Rugby Tournament held in Manchester,
U.K. (2011) and participation of KISS students in Asian Games at Guanzhou (China) and
Commonwealth Games (New Delhi). Each student passing out from the Institute is becoming a
Change Agent for the future.

28
The unique experiment to eradicate poverty through education has become successful in KISS.
Many world organizations including UNESCO, UNICEF, UNFPA, and US Federal Government
have come forward to be associated with various programmes of the Institute. Through
successful initiative and relentless effort, KISS has come nearer to achieving some of the most
important goals of the Millennium Development Goals. The Institute has been frequented by
Presidents, Vice Presidents, Union Ministers, Governors, Chief Ministers, Policy Makers,
Planners, Nobel Laureates, Social Activists, Academician and Diplomats who unequivocally
have described it as 'Incredible'. Activities of KISS have attracted attention of leading national
and international media. Eulogy and commendation for achievements of the institute have
regularly featured in leading national and international newspapers and magazines like The
Time, Wall Street Journal, South China Morning Post, Readers' Digest and Asia Post. Public
Broadcasting Service (PBS), a top U.S. TV channel, has beamed a report on KISS in its news
hour.

Genesis

Achyuta Samanta, Founder of KISS had always nurtured vision of a world free from hunger,
poverty, illiteracy and ignorance because he himself had to go through all these things in his
childhood. Untimely demise of his father when he was only four years old plunged the whole
family comprising 7 siblings and widow mother into the mire of abject poverty and deprivation.
With no fortune to fall back on, the family languished in their remote native village in Odisha
and would often go without a square meal for days. The grueling experience of his childhood had
convinced the young Achyuta Samanta quite early in life that hunger, poverty, ignorance, and
illiteracy kill people from within and further deprive them of livelihood earning skills. With great
hardship and struggle, Achyuta Samanta completed his Masters in Chemistry in 1987 and soon
became an academic. But deep within his passionate heart, he cringed to do something to
emancipate the poor and the deprived. His passion took him to the tribal hinterland where he
traveled extensively and even stayed for days together among the poor and much alienated Juang
tribal community in Keonjhar district and the Bhumija and Kolhas of Mayurbhanj district and
watched from a very close range how the government and NGO organizations worked in their
endeavor to develop the tribal communities.

29
His first hand practical experience made him realize that lack of education was the sole reason
why the tribal were not developing despite tremendous contributions being made by the
Government and different NGOs. The tribal had a different lifestyle of their own which had been
solely dependent on the forests surrounding their habitat, but with gradual deforestation their
very survival was at stake. The livelihood earning skills of the mainstream population was totally
incomprehensible for them. Life for them had been of not much meaning. They lead mostly a
listless life and lived from one moment to the other enjoying the sporadic small spots of
affluence brought by the various schemes of the Government and the NGOs. Enriched with
wisdom derived from experiences of his own life and that from his visits and stays in the tribal
hinterland, the young academic Achyuta Samanta, with all his savings that amounted to only Rs
5000/- (100 USD), was prompted to start a small training institute - Kalinga Institute of
Industrial Technology (KIIT) in 1992 at Bhubaneswar, the capital city in a rented building. He
also set up another institute side by side, the Kalinga Institute of Social Sciences (KISS)
dedicating it especially for the basic education of the tribal children starting with 125 poorest
tribal children. He had approached Late Shri P. K. Bal, an eminent social activist & journalist,
who shared his intention of tribal development, to be the President of KIIT & KISS. However,
cruel hands of destiny even snatched this support in 1999, when Shri Bal had an untimely
demise. Achyuta Samanta's brilliant visionary mind knew right from the start that KIIT would
sustain KISS as he himself had neither a fortune of his own to spare nor any influential backing
and banking support. KIIT has been deftly mentored by Samanta as a result of which it has
consistently grown into a self-sufficient educational organization and nurtured the growth of
KISS, from pillar to pillar. KIIT provided a sustainable financing and technically enabling model
for KISS because living on donations, which would come by sporadically, could not have
provided a sustainable source of finance and other resources. Since then both the organizations
are prospering impressively. KISS, the philanthropic spirit of KIIT and its founder Achyuta
Samanta, today has student strength of 25,000 of whom 12,200 are girls who receive holistic
education from Kindergarten to post graduation and beyond with vocational training in a wide
range of disciplines. Besides implementing the United Nation's Millennium Development Goals,
KISS has been able to bring about much needed social changes in the tribal hinterland of the
state and its neighboring states by arresting spread of Maoist and Naxalite insurgency in these
areas and inculcating in the tribal minds a strong will to live life big.

30
KISS, through its 25,000 students who come from as many families in different villages
across the state, is indeed transforming tribal mindset and triggering their joining the
mainstream society. The innovative pedagogy and thoughtful curricula adopted in KISS ensures
zero dropout, whereas tribal schools in the tribal hinterland suffer from rampant dropout menace.
Staying in the middle of the mainstream population has been providing the much needed
confidence and acquaintance with skills of the mainstream and for seamless coexistence. KISS
students are excelling not only in their studies, but also in various extracurricular activities,
particularly sports winning national and international recognition. Students on their graduation
find gainful employment on their own merit in different organizations at par with their
counterparts from the mainstream society. Today they even look forward to higher education in
professional domains such as engineering, medical, law, management, etc. KISS's success story
has spread far and wide and has been bringing many inquisitive visitors including State and
Country Heads, Diplomats, Nobel Laureates, Social Activists, Social Researchers and Scholars,
Legal Luminaries from across the world to its campus at frequent intervals. World organizations
like UNICEF, UNDP, etc. have also come forward to join hands with KISS in its endeavor
towards economic and social emancipation of the tribal. Press and Media from across the globe
have been publishing the saga of success of KISS. The success of KISS has attracted the
attention of planners and administrators of different governments within the country and
abroad calling for replication of KISS in their respective areas. While a branch of KISS,
KISS-DELHI, is operating successfully in the National Capital Region of Delhi, plans are in the
offing to open branches of KISS in all the thirty districts of the state of Odisha, 10 states in India
and in 10 foreign countries. KISS's founder, Achyuta Samanta's has been propagating the
KISS Model in different developing and underdeveloped countries in his bid to change the
lives of the poor and the hapless throughout the globe. KISS has grown as an amazing social
initiative and is catching the fancy of great thinkers throughout the globe.

31
Today KISS has :-

Current Strength: 25,308 children (40% boys and 60% girls) as

on 2016

Land Area 100 acres

KISS plans to educate
Built-up Area 30,00,000 sq ft 2,00,000 tribal children
Students are enrolled from 62 indigenous communities (tribes) in its different
of Odisha, of which 13 are classified as primitive branches located in

Students from adjoining States Odisha & other states

over the next decade.
5% reserved seats in different professional courses of KIIT
University

Library in 25,000 sq ft building with over 20,000 titles

Uniqueness of KISS:

25,308 tribal students getting free education from Standard I to Post Graduation
Largest Residential school for the tribal children in the world.
Free lodging, boarding, healthcare and vocational training
Students Representation from more than 65 different tribes including 13 PVTG's and 10
states

Infrastructure at KISS:

100 acres of land area

35,00,000 square feet of built uparea in three campuses
25000 square feet library building
12,000 capacity 3 dining halls
3 State of the art Mechanized Kitchen.
5% of total seat of KIIT University is reserved in professional courses for meritorious
children of KISS to pursue free professional education.

32
 Wi-Fi enabled campus
Security system with Close Circuit Television (CCTV) cameras all around the campus
4 state of the art computer labs to seat 2000 students
850 KW Solar power plant in 3 campuses
Solar Water Heating System for Mechanized Kitchen
Reverse Osmosis Drinking Water plant
200 bedded in-house medical facility, duly supported by Kalinga Institute of Medical
Science (KIMS).
Biogas Plant to process food waste into biogas for use in cooking purposes.
Science Park for children to understand various aspects of Physics and scientific
learning.
Automatic Laundry machines for washing clothes

33
34
35
36
37
 FINANCIAL MANAGEMENT OF KISS

Kalinga Institute of Social Sciences (KISS) was started in the year 1993 with just 125 tribal
students. With the growth of KIIT Group of Institutions, KISS has also grown as the biggest
residential tribal institute of the country. KIIT is the backbone of KISS. Now, 25,000 tribal
children of 62 tribes, including 13 primitive tribes, are pursuing their education from Class-1 to
post-graduation levels in KISS. The sources of income of KISS are as following;

As per the resolution passed by the KIIT Society, 5% of the total turnover of KIIT
amounting to Rs. 40.14 crores (approx.) is donated to KISS as a charitable work/social
responsibility.

As per the statutory rules of the KIIT University, each and every staff contributes 3% of
his/her gross salary to KISS amounting to Rs. 5.36 crores (approx.).
The Contractors/Vendors of KIIT Group of Institutions contributed to KISS an amount of
Rs. 1.07 crores (approx.).

The donations from civil society and well-wishers contribute benevolently for this noble
cause amounting to Rs. 5.02 crores (approx.).

Donations received from different organizations, corporate houses like Give India
amounting to Rs. 9.71 cores (approx.).

Sale proceeds of vocational products produced by KISS amounting to Rs.0.12 crores

(approx.).

Further, Grants & others received from various organizations for projects Rs. 4.93 crores.

Balance funds requirement of Rs. 9.69 crores met from market credits.

Total recurring expenditure for the year 2015-16 is Rs. 76.04 crores.

38
Abridged Income & Expenditure Statement for the year ended 31.03.2016

Particulars Yr:2016 Yr:2015 Particulars Yr:2016 Yr:2015

Amount Amount
(Rs.) (Rs.)

Academic / Co- 98,169,610 1142,66,624 Donation -

curricular
Expenses

Mess Related 342,687,688 2980,65,310 KIIT & 401,413,413 3429,49,089

Expenses KIMS

Employee 129,508,596 990,09,697 Corporate 22,682,882 202,73,180

benefits expense

Project 15,130,248 236,65,857 Give India 4,962,039 72,30,694

Expenses

Office Related 105,900,923 626,05,891 Staff (KIIT 53,561,044 434,20,984

Expenses Group of
Institutions)

Indirect 47,132 55,484 Vendors 10,655,938 116,76,102

Expenses

Depreciation 69,023,744 547,99,478 Others 119,702,686 1120,06,391

and amortisation
expense

39
 Sub-total 612,978,002 5375,56,440

Grant 39,034,124 515,87,199

Other 10,306,892
Income 48,50,551

Excess of 98,148,923 584,74,151

Expenditure
over Income

Total 760,467,941 6524,68,341 Total 760,467,941 6524,68,341

Abridged Balance Sheet as at 31.03.2016

Liabilities Yr:2016 Yr:2015 Assets Yr:2016 Yr:2015

Amount (Rs.) Amount

(Rs.)

Capital Account Fixed 890,234,848 7291,95,878

Assets

Opening Balance 615,960,439 4420,20,388 Non-current 5,094,934 45,95,968

assets

Additions during 181,009,416 Current 123,674,665 616,69,023

the year (KIIT) 1739,40,051 Assets

Total 796,969,855 6159,60,439

40
Reserves & (250,500,743) (1523,51,818)
Surplus

Current 308,610,385 2318,52,248

Liabilities

Advance from 100,000,000 1000,00,000

KIIT

Office Related 63,924,950

Advance

Total 1,019,004,447 7954,60,869 Total 1,019,004,447 7954,60,869

Total 5% seats in professional education programmes of KIIT University are reserved for
meritorious students from KISS. Several meritorious students from KISS are studying free of
cost in KIIT Group of Institutions in technical and professional courses, such as Bachelor of
Medicine & Surgery (MBBS), Dental Sciences & Surgery, Nursing, Engineering, Masters in
Computer Application (MCA), Bachelor / Masters in Law, Management (MBA), Diploma in
Engineering, etc. This involves a financial outlay of Rs. 25 crores (appx).

2. KIIT University also provides support services by way of visiting faculty, transpiration,
maintenance for electricity / water supply system, medical assistance, security, etc. and these
costs will add up to further Rs. 10.00 crores

3. Thus the overall Recurring costs will be in the range of Rs. 111.04 crores. This does not
include KIIT contribution towards Non- recurring expenses of Rs. 18.10 crores by way of
Corpus donation for up-gradation of infrastructure facilities.

41
KIIT OVER THE YEARS...

Established in 1992 and opened five years later as a KIIT University is today one of the most
prestigious universities in India. Its commitment to teaching excellence led to the grant of
university status under Section 3 of UGC Act, 1956 by the Ministry of Human Resources
Development, Govt. of India in 2004, within only seven years of its inception. KIIT is relatively
young, but prizes excellence and ambition. The contributions of KIIT's faculty, students and
alumni have been earning national and international recognition.

It serves more than 27,000 students through its 28 Schools imparting globally recognised
bachelor's, master's and doctoral degree programmes in 100 plus disciplines, spanning
engineering, medicine, management, biotechnology, law and more. Apart from global
recognition and pedagogical excellence, the University provides the best possible academic and
non-academic grooming and empowerment that enable one to become a global citizen and make
an impact in the global workplace.

KIIT is an internationally focused university and welcomes students from all corners of the
globe. With international students enrolled from around 45 countries, it prides itself on being a
cosmopolitan and multicultural campus. Laying claim to a global mindset, the university actively
partners with other leading higher education institutions around the world to provide
international opportunities to its students and faculty. With tie-ups with 140 leading institutions
of the world, KIIT has a presence in over 50 countries, including USA, UK, Germany, Russia,
Czech Republic, Japan, South Korea and Kenya.

KIIT is a multi-campus university. Its 23 campuses span 25 sq. km. and have a built up area of
12 million sq. ft. Apart from academic blocks, administrative blocks and student residences,
attractions on campus include a Rose Garden, Art Gallery, Sculpture Garden, Tribal Museum
and a 35000 capacity multisport stadium.

KIIT emphasises close collaborations between faculty and students to address academic,
technological and societal challenges. A strong and effective tutor-mentoring system is among
many innovative teaching-learning and student-friendly initiatives taken by KIIT. Students of the

42
University have not only gone on to join some of the world's most successful companies, but also
excelled in fields of their choosing, including participating in Olympic games as a member of
Indian
contingent.

KIIT University is unique in integrating professional education with social concern. Its protg,
Kalinga Institute of Social Sciences (KISS), provides holistic education from KG to PG, food
accommodation, health care and all basic necessities absolutely free to 25,000 poorest of the
poor tribal children.

Declared a University under Section 3 of UGC Act, 1956

'A' Category University as per notification of Ministry of HRD, Govt.

of India

Accredited by NAAC of UGC in 'A' Grade

Tier 1 Accreditation (Washington Accord) for Engineering Streams by

NBA

All academic programmes recognized by the respective Statutory Bodies

of the Govt. of India.

Respective Courses Approved by Statutory Bodies of Govt. of India:

MCI, DCI, BCI, INC, etc.

The institute also has other recreational and intellectually stimulating facilities like Sculpture
Park, Art Gallery, Tribal Art Gallery, Rose Garden, Medicinal Herbs garden, etc. The hostels,
the food courts dotting the campus and other essential amenities like banking, postal services,
transport, currency exchange counters, healthcare support, makes the campus very livable and
world class.

43
Intellectual Capital & International Recognition

KIIT is a structured and decentralized institution. It is perhaps the only self-financing institution
in the country where top functionaries, including Chancellor and Vice Chancellor, are renowned
academicians. Each school is headed by a distinguished academician. The University has a
healthy student-to-faculty ratio of 12:1, with 1800 faculty members offering a rigorous
curriculum and access to varied learning opportunities and hands-on research. The faculty are
drawn from institutions of repute such as IITs, IIMs, XLRI, IISc, JNU, etc. The quality is amply
demonstrated by the patents held by various faculty members, the-state-of-the-art labs, the
research grants coming from various agencies both in India and abroad, national and
international conferences, symposiums and workshops held here and hundred percent placement
record.

Faculty members of the University actively involve themselves in consultancy projects from
various industries. Currently nearly 100 research and consultancy projects funded by various
national and international funding agencies like UBS Promedica Foundation, Switzerland;
Karolinska Institute, Sweden; DST, DBT, MNRE, Govt. of India, etc. are ongoing with

substantial budget outlay. During the past one year, faculty members and research scholars of the
University published around 700 research papers in peer reviewed journals and around 300
papers were presented in national and international seminars/ conferences. Over 600 of the
research papers have been indexed in international databases like Scopus.

KIIT actively promotes students research and projects of its students have the distinction of
being appreciated at national and international forum, including being selected for the prestigious
Indian Science Congress.

KIIT has embraced memberships of several important institutions including :

International Association of Universities (IAU)

Association of Indian Universities (AIU)
Association of Commonwealth Universities (ACU)
University Mobility in Asia and the Pacific (UMAP)

44
International Association of University Presidents (IAUP)
Association of Universities of Asia and the Pacific (AUAP)
European Association of International Education (EAIE)
International Institute of Education (IIE), New York
United Nations Academic Impact (UNAI)
Eurasian Silk Road Universities Consortium (ESRUC), Turkey

Centre for Innovation & Research

Research and Development is one of the significant activities in KIIT University, and given a
high priority. The University has taken steps to build and nurture a culture of research &
development and innovation. It has established a Centre for Scientific Research with seed money
of US$ 1.2 million, the only private University in the country to establish such a centre. The
multidisciplinary research work has been attracting financial support to the tune of few million
dollars every year. Further, a Central Advanced Research Centre (CARC) has been
established in 1 lakh sq. ft. built up area with sophisticated equipments for advanced research.

KIIT AT A GLANCE

Established in 1997 as an institution and declared as University (U/S 3 of UGC Act,

1956) by Ministry of HRD, Govt. of India in 2004 - within only 6 years of its inception.

Founded by Noted Social and Educational Entrepreneur, Achyuta Samanta.

Located in an idyllic setting in Bhubaneswar, the capital city of Odisha, India.

'A Category' University as per notification of Ministry of HRD, Govt. of India

'Tier 1' Accreditation (Washington Accord) by NBA

Accredited by NAAC with 'A' Grade

45
All academic programmes recognized by the respective Statutory Bodies of the Govt. of
India.

Well-known among student community for its student friendly policies and focus on
education with human touch.

It sprawls over 25 sq. km. area with 12 million sq. ft. of built up area. There are 28
constituent schools.

Over 27,000 full-time students in more than 100 academic programmes.

Own entrance examination (KIITEE 2017) for admission into most of the academic
programmes.

Students from all States of India and over 45 foreign countries.

Cent percent placement in all the academic programmes since inception.

1800 faculty, scientists and researchers from 13 countries

Academic partnership with more than 140 world-class universities from across the world.

23 Self-sufficient campus for each stream of education, replete with academic block,
residential block, open air theatres, auditorium, sports complex and cafeteria.

First university in India to implement SAP (Big Bang approach).

Sports Facility: Modern stadium (seating capacity of 35,000), Indoor Stadium and 10
sports complex.

46
Amenities like branches of all major banks, departmental store, Post Office and Railway
Reservation Centre in the campus.

3300 CCTV cameras monitoring all parts of KIIT and its vicinity.

Excellent ambience for national and international conferences in Central Convention

Centre Complex.

International standard multi-purpose stadium with seating capacity of 35000.

One of the largest in-campus Indoor Stadium in the country.

15 Food Courts specializing in cuisines from all over the world.

Several academic events and national & international conferences organized round the
year.

Over 50 countries where KIIT has presence.

As many as 13 Nobel Laureates and Ambassadors from 75 countries have visited KIIT,
among other high level dignitaries from all over the world.

47
 CHAPTER-III

OBJECTIVE OF THE
STUDY

48
OBJECTIVE OF THE STUDY

A preface understanding about the availability of various sources of finance for

the company.
An overview about the advantages and disadvantages of the sources.
Sources of Finance in the terms of time duration and generation.
To discuss the purpose served by short-term finance;
To identify and explain the various sources of short-term finance;
To describe the relative merits of trade credit and bank credit;
To explain the advantages and disadvantages of bill discounting;
To distinguish between bank over-draft and bank loans;
To explain the benefits and limitations of retained earnings;
To explain the merits and demerits of Public Deposits;

49
 CHAPTER-IV

RESEARCH
METHODOLOGY

50
 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. it

may be understood as a science of studying how research is done scientifically. So, the research
methodology not only talks about the research methods but also considers the logic behind the
method used in the context of the research study.

TYPES OF RESEARCH DESIGN :

EXPERIMENTAL RESEARCH DESIGN

EXPLORATORY RESEARCH DESIGN
DESCRIPTIVE& DIAGNOSTIC RESEARCH
Exploratory Research Design: This research design is preferred when researcher has a vague
idea about the problem the researcher has to explore the subject.

Experimental Research Design The research design is used to provide a strong basis for the
existence of casual relationship between two or more variables.

Descriptive Research Design It seeks to determine the answers to who, what, where, when
and how questions. It is based on some previous understanding of the matter.

Diagnostic Research Design It determines the frequency with which something occurs or its
association with something else.

RESEARCH DESIGN USED IN THE STUDY:

Descriptive research design is used in this study because it will ensure the minimization of bias
and maximization of reliability of data collected. Descriptive study is based on some previous
understanding of the topic. Research has got a very specific objective and clear cut data
requirements The researcher had to use fact and information already available through financial
statements of earlier years and analyse these to make critical evaluation of the available material.
Hence by making the type of the research conducted to be both Descriptive and Analytical in
nature. From the study, the type of data to be collected and the procedure to be used for this
purpose were decided.

51
DATA COLLECTION METHOD

The process of data collection begins after a research problem has been defined and research
design has been chalked out. There are two types of data :

PRIMARY DATA :

It is first hand data, which is collected by researcher itself. Primary data is collected by various
approaches so as to get a precise, accurate, realistic and relevant data. The main tool in gathering
primary data was investigation and observation. It was achieved by adirect approach and
observation from the officials of the company.

SECONDARY DATA - it is the data which is already collected by someone else.

Researcher has to analyze the data and interprets the results. It has always been important for the
completion of any report. It provides reliable, suitable, adequate and specific knowledge.

TYPE OF DATA USED IN THE STUDY

The project includes both primary and secondary sources of data. The data collected through
these sources has been organized, analyses and interpreted so as to draw conclusion and arrive at
appropriate recommendations.

PRIMARY SOURCES USED IN THE STUDY

I have collected adopted the method of personal interview for the purpose. I have personally
interviewed the vice president of commercial department of the concern and have gathered all
the important information regarding my project work.

I have gathered primary data from the following sources :

Financial reports provide by the Kalinga Institute of Social Sciences.

Finance department of Kalinga Institute of Social Sciences

52
SECONDARY SOURCES USED IN THE STUDY :

Published collections of data.

Financial sites on the internet.
Official web site of the company.

53
 CHAPTER-V

REVIEW OF LITERATURE

54
REVIEW OF LITERATURE

Granof (1984) has discussed that a tax exempt lease is an arrangement similar in
economic substance to an installment purchase. The lessor extends credit to a municipality in
exchange for the right to use an asset for a period of time, during or at the end of which the
lessee has the option to purchase the property 35 less than its market value. Each payment of rent
is allocated between principal and interest. The interest is tax exempt to the lessor, as if it were
interest on a conventional instrument of debt. For tax purposes the lessee is regarded as the
owner of the property. The lessor is not eligible for the tax benefits, such as accelerated
depreciation and the investment tax credit. The paper evaluates, and attempts to put into
perspective, each of the main advantages that have been ascribed to leasing. Leasing enables a
municipality to obtain funds at low interest rates by tying finance costs for the purchase of
property, to offset interest costs with arbitrage earnings, to circumvent debt limitations, to avoid
bond referenda, and to reduce debt issue costs.

Balasubramanian (1985) has found that there are three types of companies operating
under the label of leasing. The first type of companies includes those companies which have
been doing standard leasing operations for a long time; others are captive units promoted by a
group of companies for the purpose of acting as buying and selling agency for group of
companies, earning profits in the process of doing so and lastly, the third type of companies
which have been floated not just for the purpose of leasing but for other purposes mostly for
diversification of funds. Author has examined the leasing companies from the point of view of
investors and entrepreneurs who avail the facilities of leasing companies. He has emphasised that
where the leasing has not yet picked up, companies should enter into agreement with
manufacturers by which they (manufacturers) could get definite instalment payment facilities
and also could arrange a number of clients who avail the facility offered by the leasing
companies. He has found that companies in the market have not indicated about any tie up either
with the manufacturers or with clients. The author has also 36 suggested accounting treatment of
various transactions in the books of lessor and lessee.

Bhattacharyya (1987) has highlighted the various issues in context with leasing. The
Author has attempted to focus upon the reasons for the non - popularity of leasing as a source of
finance in the country for a long period. He has pointed out the industrial development in our
55
country is quite recent as compared to matured economies and easy availability of funds from
government is not generating much need for various alternative sources. The Author has
highlighted that lease transaction in India is affected greatly due to requirements of various laws,
such as, Income Tax Act, 1961, Companies Act, 1956 and MRTP Act, 1969. He has pointed out
that accounting bodies of different countries have suggested the form of presentation and
disclosure of lease transactions, but the universal acceptability of these standards is yet to be
achieved.

Brahmaiah B (1989) in this paper focuses mainly on the growth, problems and prospects
of the leasing industry in India. It starts with the definition and classification of leasing. The
major problem areas identified include resource crunch, income and sales tax, rigid procedure for
import leasing, lack of accounting standards and legislative constraints. Finally, the paper
concludes that the prospects of leasing are high because of the high potential in the market and
expected healthy growth of the leasing industry

Gupta (1990) focuses upon Indias tax and non-tax policy for lease financing. He has
given the view that other benefits do not play a great role in encouraging lease finance as tax
avoidance opportunity. Tax avoidance opportunities are available to both lesser and lessee and
trading in tax shields is alleged to be the 37 chief determinant of lease rentals. But sales tax
levied on lease transactions is unjustified since capital equipment would already have born sales
tax when purchased by a lessor. Hence, this type of tax will adversely affect the lease
transactions. So, current state of regulatory taxation and accounting measures need an urgent
reform since the combined effect of various coordinated measures is most likely to be one which
includes the inefficient finance of capital projects with attendant social loss. Leasing business is
considered as youngest segment of financial market and provides a few genuine advantages. So,
a rational policy at this stage is required to be undertaken by government to enhance lease
finance and act as a watchdog over leasing and financial markets.

Bhattacharyya (1987) has highlighted the various issues in context with leasing. The
Author has attempted to focus upon the reasons for the non - popularity of leasing as a source of
finance in the country for a long period. He has pointed out the industrial development in our
country is quite recent as compared to matured economies and easy availability of funds from
government is not generating much need for various alternative sources. The Author has

56
highlighted that lease transaction in India is affected greatly due to requirements of various laws,
such as, Income Tax Act, 1961, Companies Act, 1956 and MRTP Act, 1969. He has pointed out
that accounting bodies of different countries have suggested the form of presentation and
disclosure of lease transactions, but the universal acceptability of these standards is yet to be
achieved.

57
 CHAPTER-VI

FINDINGS, LIMITATIONS,
SUGGESTIONS,
CONCLUSION

58
FINDINGS

The study has great significance and provides to financial information that directly or
indirectly interact with the Institution.
It is beneficial to management of the company by providing crystal clear picture
regarding important aspects like liquidity, leverage, activity.
The study is also beneficial to employees and offers motivation by showing how actively
they are contributing for institute growth.
The investors who are interested in investing in the institute shares will also get proper
record by going through the study and can easily take a decision whether to invest or not
to invest in the institute shares.

59
LIMITATION OF THE STUDY

The study provides an insight into the source of finance and other aspects of Kalinga Institute of
Social Science. Every study will be bound with certain limitations. The below mentioned are the
constraints under which the study is carried out :

One of the limitations of the study was lack of availability of sample information. Most
of the information has been kept confidential as per the policy of company.
Time was an important limitation.
Reliability on usage of secondary data is another limitation
Financial management itself will not completely show the organization good or bad
financial position.
The study of source of finance can be only a means to know about the financial condition
of the organization and cannot show a through picture of the activities of the
Organization.

60
SUGGESTIONS

The study has brought out certain findings on the relationship between financing patterns and
investment and concluded that market imperfections exist in the financial market. However, it
has not been possible for the study to incorporate an analysis of the behavioral pattern across
different institution groups. Similarly we have not considered the separate effects of money and
capital markets on investment. The study thus suggests certain areas for further research with a
particular focus on industry variations and with suitable measures to analyse the effect of
different dimensions of liberalization in the financial system. This will help to get deeper
understanding of the dynamic relationship between financing patterns and investment in the post
reform period.

61
CONCLUSION

The study found that the financial liberalization reduced the financial constraints basically for
large group and exporting firms. We have also concluded that the impact of firm specific factors
on debt reflects information asymmetry and adverse selection after financial reforms. The
differences in the results on the determinants of investment across different sized firms and other
categories in the Indian context suggest that the impact of financial liberalization on capital
structure and investment is influenced by the differences in the financial structure of firms.

Conclusion of the financial management of Kalinga Institute of Social Science

Total 5% seats in professional education programmes of KIIT University are reserved for
meritorious students from KISS. Several meritorious students from KISS are studying free of
cost in KIIT Group of Institutions in technical and professional courses, such as Bachelor of
Medicine & Surgery (MBBS), Dental Sciences & Surgery, Nursing, Engineering, Masters in
Computer Application (MCA), Bachelor / Masters in Law, Management (MBA), Diploma in
Engineering, etc. This involves a financial outlay of Rs. 25 crores (appx).

KIIT University also provides support services by way of visiting faculty, transpiration,
maintenance for electricity / water supply system, medical assistance, security, etc. and these
costs will add up to further Rs. 10.00 crores

Thus the overall Recurring costs will be in the range of Rs. 111.04 crores. This does not include
KIIT contribution towards Non- recurring expenses of Rs. 18.10 crores by way of Corpus
donation for up-gradation of infrastructure facilities.

62
BIBLIOGRAPHY

http://www.kiit.ac.in/aboutus/overview.html
http://www.kiss.ac.in/media/index.html
http://www.kiss.ac.in/aboutus.html
https://efinancemanagement.com Sources of Finance
www.fao.org/docrep/w4343e/w4343e08.htm
https://www.extension.iastate.edu/agdm/wholefarm/html/c5-92.html
"Financial Planning Curriculum Framework". Financial Planning Standards Board.
2011. Retrieved 7 April 2012.
Doss, Daniel; Sumrall, William; Jones, Don (2012). Strategic Finance for Criminal
Justice Organizations (1st ed.). Boca Raton, Florida: CRC Press. p. 23. .
Doss, Daniel; Sumrall, William; Jones, Don (2012). Strategic Finance for Criminal
Justice Organizations (1st ed.). Boca Raton, Florida: CRC Press. pp. 5354.

63
QUESTIONNIARE

1. What is the current position of student ratio from 2005 to till present?

Interpretation

64
 2. What is the new professional course adopted by the institute in a coming
year?

Interpretation

65
 3. What are the major organizations which are associated with Kalinga
Institute?

The unique experiment to eradicate poverty through education has become successful in KISS.
Many world organizations including UNESCO, UNICEF, UNFPA, and US Federal Government
have come forward to be associated with various programmes of the Institute. Through
successful initiative and relentless effort, KISS has come nearer to achieving some of the most
important goals of the Millennium Development Goals. The Institute has been frequented by
Presidents, Vice Presidents, Union Ministers, Governors, Chief Ministers, Policy Makers,
Planners, Nobel Laureates, Social Activists, Academician and Diplomats who unequivocally
have described it as 'Incredible'. Activities of KISS have attracted attention of leading national
and international media. Eulogy and commendation for achievements of the institute have
regularly featured in leading national and international newspapers and magazines like The
Time, Wall Street Journal, South China Morning Post, Readers' Digest and Asia Post. Public
Broadcasting Service (PBS), a top U.S. TV channel, has beamed a report on KISS in its news
hour.

4. How effective NIITE University research and outreach activities with KISS.

The is being held with in association with USA/S university of Penny Sylvania and university of
New England and Netherlands ERAMUS University.

Rest of detail can be seen in seasonal magazines

5. What is the technique of education adopted by KISS?

KISS Delhi is well equipped with Wi-Fi system, video conferencing facility and closed circuit
camera system and VC Facility is used for educational purpose is connecting to Bhavneshwar.

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