Sources of Long Term Finance - 5620 Words

Sources of Long-term Finance 19.1 Introduction As you are aware finance is the life blood of business. It is of vital significance for modern business which requires huge capital. Funds required for a business may be classified as long term and short term. You have learnt about short term finance in the previous lesson. Finance is required for a long period also. It is required for purchasing fixed assets like land and building, machinery etc. Even a portion of working capital, which is required to meet day to day expenses, is of a permanent nature. To finance it we require long term capital. The amount of long term capital depends upon the scale of business and nature of business. In this lesson, you will learn about various sources of†¦show more content†¦Shares: These are issued to the general public. These may be of two types: (i) Equity and (ii) Preference. The holders of shares are the owners of the business. 2. Debentures: These are also issued to the general public. The holders of debentures are the creditors of the company. 3. Public Deposits : General public also like to deposit their savings with a popular and well established company which can pay interest periodically and pay-back the deposit when due. 4. Retained earnings: The company may not distribute the whole of its profits among its shareholders. It may retain a part of the profits and utilize it as capital. 5. Term loans from banks: Many industrial development banks, cooperative banks and commercial banks grant medium term loans for a period of three to five years. 6. Loan from financial institutions: There are many specialised financial institutions established by the Central and State governments which give long term loans at reasonable rate of interest. Some of these institutions are: Industrial Finance Corporation of India ( IFCI), Industrial Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India (ICICI), Unit Trust of India ( UTI ), State Finance Corporations etc. These sources of long term finance will be discussed in the next lesson. Sources of Long-term finance :: 33 Intext Question 19.1 A. Fill in the blanks withShow MoreRelatedBusinesses keep a close eye on the money they make and the bills they owe. Anything that is not paid immediately is financed. Critically discuss the d1624 Words   |  7 PagesIntroduction Finance of a business means that the business raises funds to run its activities. It is an essential part of running a business because without business finance, the business will not be able to develop, grow and even start. In addition, business finance keeps cash flowing. Businesses usually raise funds from the shareholders, long-term and short-term sources. 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INTRODUCTION Private limitedRead MoreWhat is Finance Management?1598 Words   |  6 PagesWhat is finance management? â€Å"Financial Management is the Operational Activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operation.† by Joseph Massie. What is capital market? â€Å"Are places where companies which need long term finance can meet investor† (business study guide, p120) P1.1- Identify the sources of finance available to new business you have chosen. Every business needs finance of money to invest; there are a number of waysRead MoreWhat Are The Types Of Long- Term Finance971 Words   |  4 PagesA high amount of investment is required to enter in a new venture. The main types of long- term finance that are available to make investment in venture capital business includes both internal and external source of finance. 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SecondlyRead MoreSources of Finance972 Words   |  4 PagesSources of finance What are the main sources and finance for UK firms and why? All firms need some kind of financing. Access to finance may differ considerably from firm to firm depending on what type of business they are and how big/known they are; Sole Trader, Public Limited or Private Limited Company. There are both INTERNAL and EXTERNAL sources of finance. Finance can be short, medium or long term. Internal sources of Finance: 2 main types 1) Funds from the owner(s) and the family