factors affecting long term funds

1. Factors affecting long term funds
by Lakshmi .B

2. Long term funds
 Financial system is a complex system consisting of financial market
, financial intermediaries, financial instrument .
 Key objective of financial system is to transform savings into
investment.
 Long terms funds are usually required for long term investment.
 It was made by individuals include housing and consumer durable.
 Firms using long-term fund for long terms projects.&govt also raise
long term funds by issuing dated securities.

3.  There are various condition must be fulfilled for long term funds to
become available to the users of long term funds.
 First there is should be sufficient savings in the economy
 Second right kind of long term instrument should be issued by
companies
 Finally there should be right kind of financial intermediaries.

4. Factors affecting long term fund
 Domestic savings
a) three major segments of economy is ‘household’ , ‘private
corporate ‘, ‘government segments’.
b) The overall savings rate is determined by the savings rates of
individual segments
 Net flow from abroad
a) Domestic saving can be buttressed by net inflow from abroad.

5.  Gross domestic capital formation (GDCF)
a) Domestic savings plus net inflow from abroad can be used for
domestic investments.
 Role of financial markets
a) Price discovery Is a key function
b) It will provide liquidity to financial assets.
c) It should also reduce cost of transaction. Cost are search cost and
information cost.

6.  Capital markets
a) it facilitates the allocation of funds between savers and borrowers.
b) Capital market raising long term funds in an effective manner as
well allocates funds efficiently.
 other financial institution
a) Financial institution includes development banks, commercial
banks, insurance companies and pension funds.
b) Financial institution also need to be well regulated

7.  Users of long term funds
a) Both private and public sector requires long term funds for their
operations including implementation of new projects.
b) Projects financing techniques can be used for a large number of
infrastructure related as well as large projects.
c) It involves large number of parties includes lenders ,borrowers ,
suppliers

8. Thank you  