Distinguish between mortgage & pledge

Sl.	Particulars	Mortgage	Pledge
1	Property type in Security	Mortgaged is an immovable property	Pledged is a movable property
2	Property ownership	The property is transferred to lender	The property remains to pledgor
3	Property custody	Possession of property will be with borrower	Goods delivered by the pledgor will be in lender
4	Legal authority to sell property	Mortgagee can sell only with the permission of the Court	Lender can sell without the intervention of the Court
5	Rights to foreclosure	A mortgagee has the right of foreclosure that restrict the borrower from taking back the property under certain circumstances	A pledgee does not have the right of foreclosure that cannot restrict the pledgor from taking back the property

Define permanent working capital and variable working capital, difference between variable working capital and permanent working capital

 Permanent Working Capital is to carry on business a certain minimum level of working capital is necessary on  a  continuous and  uninterrupted basis.  For  all practical purposes, this requirement will have to be met permanently as with other fixed assets. This requirement is referred to as permanent working capital.

 

 Temporary Working Capital is refers to any amount over and above the permanent level of working capital is temporary, fluctuating or variable working capital. This portion of the required working capital is needed to meet fluctuations in demand consequent upon changes in production and sales as result of seasonal changes.

 

difference between variable working capital and permanent working  capital.

Particulars	Permanent Working Capital	Temporary Working Capital
1) Required level of amount	A certain minimum level of working capital is necessary to carry the business	Any amount over and above the permanent level of working capital is needed
2) Level of necessity	It is necessary on a continuous and uninterrupted basis	Temporarily required in case of increase of production and sales
3) Pattern of necessity	This requirement will have to be met permanently	The necessity in on fluctuating or variable position
4) Nature of working capital	The working capital cost and investment is constant	The working capital cost and investment is variable
5) Outcome level of firm	It make the minimum outcome as well as growth of the firm	It make a extra ordinary production outcome of the firm

Explain different sources of financing working capital.

 The sources of finance of financing working capital may be four categories. They are-

1. Trade Credit: It is the primary sources that trade credit make up the important source for a sum of the total working capital.

2. Bank Credit: The banks determine the maximum credit based on the margin requirements of the security. The forms of bank credit are Loan and overdraft arrangement, cash credit, bills purchase and bills discounted.

3. Non-bank Short Term Borrowing: These types of loan are found from relatives, friends, head office or project office etc.

4. Long-term Sources: It comprises equity capital and long-term borrowings.

Define Term Loan

 Term  loan  refers  to  asset  based  loan  payable  in  a  fixed  number  of  equal installments over the term of the loan, usually for 1 to 5 years. Term loans are generally provided as working capital for acquiring income producing assets like machinery, equipment, inventory that generate the cash flows for repayment of the loan. Banks have term-loan programs that can offer small businesses the cash they need to operate from month to month.