2. SOURCES OF LONG TERM FINANCE
Long term sources of finance are those that are
needed over a longer period of time - generally over a
year. The reasons for needing long term finance are
generally different to those relating to short term
finance.
3. Long term finance may be needed to fund
expansion projects - maybe a firm is considering
setting up new offices in a European capital,
maybe they want to buy new premises in
another part of the world, may be they have a
new product that they want to develop and
maybe they want to buy another company.
4.
5. EQUITY CAPITAL
Invested money that, in contrast to debt capital, is not repaid
to the investors in the normal course of business.
It represents the risk capital staked by
the owners through purchase of a company's common
stock (ordinary shares).
The value of equity capital is computed
by estimating the current market value of everything owned by
the company from which the total of all liabilities is subtracted.
On the balance sheet of the
company, equity capital is listed as stockholders'
equity or owners' equity. Also called equity financing or share
capital.
6. PREFERENCE SHARE
The Company issue preference shares in
addition to the equity shares in order to fully
meet the capital requirement. Preference
shares are those which have preferential right
to the payment of dividend during the life-
time of the company and a preferential right
to the return of capital when the company is
wound up.
8. Advantages & Disadvantages of InternalAccruals
Advantages
Retained earnings are easily available internally.
It eliminates issue and transaction cost. No dilution
of control
Disadvantages
Amount that can be raised by way of retained
earning is limited.
Opportunity cost is quite high
9. TERM LOANS
Term loan is a loan made by bank/financial institution to a
business having an initial maturity of more than one year.
FEATURES
Maturities
Security
Provided by Foreign Institutes/ Bank
Repayment schedule
Restrictive Covenants
Convertibility
10. DEBENTURES
Debenture/bond is a debt instrument indicating that a
company has borrowed certain sum of money and promises
to repay it in future under clearly defined terms.
Interest
Security
Maturity & Redemption
Options
Convertibility