1. Long – Term Sources of Finance
Dr. Madhu Dixit, Associate Professor, Faculty of Management
Email: madhu.mgmt@srmu.ac.in
Prof. (Dr.) Mohit Verma, Dean, Faculty of Management
Email: dean.mgmt@srmu.ac.in
Shri Ramswaroop Memorial University, Barabanki, 225003
2. Long – Term Sources of Finance
•Long term financing means financing by loan or borrowing
for a term of more than one year by way of issuing equity
shares, by the form of debt financing, by long term loans,
leases or bonds and it is done for usually big projects
financing and expansion of company and such long term
financing is generally of high amount.
•The fundamental principle of long term finances is to
finance the strategic capital projects of the company or to
expand the business operations of the company.
•These funds are normally used for investing in projects that
are going to generate synergies for the company in the
future years.
4. Equity Shares
Equity gives the investors a right to ownership in the company.
The capital received by a company through issue of equity shares is
permanent capital. Though investors can sell their shares and
transfer ownership to another investor but the capital of the
company remains untouched. The return on equity is varies and
depends on price fluctuations of shares.
5. • A share is a document which is issued by a company,
registered with the stock exchange, by which the holder of the
shares becomes one of the owners of the company.
• Equity shares are also known Common shares or Ordinary
shares
• Equity shareholders are the owners of the business, they
purchase shares, profit is shared with ordinary shareholders,
after all the claims have been met.
• The dividend on equity shares is not fixed, varies depending
upon the profit.
• Equity shareholders have a right to vote.
8. Preference Shares
•Preference shares are also known as Hybrid security having
features of both ordinary shares and bonds.
•Preference shareholders have preferential rights in respect of
assets and dividends.
•Preference shareholders receive their dividends before equity
shareholders
•Preference shareholders do not enjoy any of the voting rights.
•Preference shareholders have a claim on assets before ordinary
shareholders in the event of the winding up the company.
12. Debentures and Bonds
• Debentures are the popular method the companies use
to procure the long term finance for their financial
needs. The funds raised through debentures represent
the debts, and the holder’s of the debenture are the
creditors of the company. Due to this, the
characteristics of debentures are very important.
• The debenture is a written instrument that the
company sign under its common seal, acknowledging
the debt due by it to the debenture holder. The
company promises to pay the periodic payment of
interest to the holder for the use of his funds. The
company pays the fixed rate interest to the holder.