Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
SlideShare a Scribd company logo

sources of long term finance

•Download as PPTX, PDF•
•

Long-term finance is obtained for periods exceeding one year and can be used to fund expansion projects, acquisitions, and purchasing new premises. The main sources of long-term finance are loans from financial institutions, retained earnings, and issuing preference shares, debentures, or equity shares. Preference shares provide preferential dividend payments but no voting rights, while debentures are repaid at a set time and provide fixed interest payments. Equity shares represent permanent capital but have no fixed dividend rate. Retained earnings are a cost-free internal source that avoids control dilution.

1 of 9
SOURCES OF LONG-TERM FINANCE ARJUN S
LONG-TERM FINANCE •Funds obtained for a time frame exceeding one year in duration. •Needed to fund expansion projects, buy new premises, buy another company etc.
SOURCES Loans from FI’s Preference Shares Debentures Retained Earnings Equity Financing
EQUITY SHARES • Permanent capital of the company. • Voting rights on the basis of the shares they hold. • Pre-emptive rights. • Limited liability. • No fixed rate of dividend.
PREFERENCE SHARES • Preferential rights in respect of fixed rate of dividend. • Priority at the time of repayment of capital. • No voting rights and does not affect the existing control of the company. TYPES : - • Redeemable and Irredeemable preference shares. • Cumulative and Non cumulative preference shares. • Convertible and Non convertible preference shares. • Participating and Non participating preference shares.
DEBENTURES • To be repaid at a definite time as stipulated in the issue. • Low rate of interest payable. • Fixed and regular income for investors. • Interest on debenture is tax deductible. TYPES : - • Unsecured and Secured debentures. • Bearer debentures. • Registered debentures. • Redeemable and Irredeemable debentures. • Convertible debentures.
RETAINED EARNINGS • Internal source of finance. • Cost free source of finance. • No dilution of control. • Used for expansion, modernization and replacement etc. • Reinvestment of surplus earnings in the business.
LOANS FROM FINANCIAL INSTITUTIONS • FI’s : - Commercial Banks, LIC, Industrial Finance Corporation of India, SFC, IDBI, State Industrial Development Corporation. • Suitable to meet the medium-term demands of working capital. • Fixed rate of interest and amount is repayable by the way of instalments in a number of years.
sources of long term finance

More Related Content

sources of long term finance

  • 2. LONG-TERM FINANCE •Funds obtained for a time frame exceeding one year in duration. •Needed to fund expansion projects, buy new premises, buy another company etc.
  • 4. EQUITY SHARES • Permanent capital of the company. • Voting rights on the basis of the shares they hold. • Pre-emptive rights. • Limited liability. • No fixed rate of dividend.
  • 5. PREFERENCE SHARES • Preferential rights in respect of fixed rate of dividend. • Priority at the time of repayment of capital. • No voting rights and does not affect the existing control of the company. TYPES : - • Redeemable and Irredeemable preference shares. • Cumulative and Non cumulative preference shares. • Convertible and Non convertible preference shares. • Participating and Non participating preference shares.
  • 6. DEBENTURES • To be repaid at a definite time as stipulated in the issue. • Low rate of interest payable. • Fixed and regular income for investors. • Interest on debenture is tax deductible. TYPES : - • Unsecured and Secured debentures. • Bearer debentures. • Registered debentures. • Redeemable and Irredeemable debentures. • Convertible debentures.
  • 7. RETAINED EARNINGS • Internal source of finance. • Cost free source of finance. • No dilution of control. • Used for expansion, modernization and replacement etc. • Reinvestment of surplus earnings in the business.
  • 8. LOANS FROM FINANCIAL INSTITUTIONS • FI’s : - Commercial Banks, LIC, Industrial Finance Corporation of India, SFC, IDBI, State Industrial Development Corporation. • Suitable to meet the medium-term demands of working capital. • Fixed rate of interest and amount is repayable by the way of instalments in a number of years.