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Long-Term Sources of Finance - Essay Example
Finance & Accounting
Pages 8 (2008 words)
Long-Term Sources of Finance Contents Contents 2 Introduction 3 Long-term Finances 3 Sources of Long-term Finance 4 Conclusion 11 References 13 Bibliography 13 Introduction This essay is a detailed analysis of a variety of long-term sources of finance along with their advantages and disadvantages…
preference equity, common equity, debt and leasing. Long-term Finances A business needs funds for capital investments such as fixed assets like plant, machinery, land, building, furniture etc. These assets must be financed with long-term financing sources. The chief financial officer (CFO) is usually responsible for making suggestions to the senior management and board of directors related to financing issues. These suggestions and recommendations carefully analyze the advantages and disadvantages of each long-term financing option. After the decision is made by the senior management and the board, the CFO is responsible for obtaining the long-term finances. The common forms of long-term finances are preferred stock, common stock, long-term debt and leasing. A firm faces need of different types of finances through its various stages of development. A firm in its start-up generally avail funds from the banks for personal loans, government agencies and personal savings. During the rapid growth phase a firm uses internally generated funds or direct financing. The direct financing includes loans from insurance company, commercial banks or pension funds and financing by venture capitalists. The maturity phase is financed by issuing equity or debt in primary markets. ...
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