1. 01/25/13
SOURCES OF LONG-
IABM, Bikaner
TERM FINANCING
1 Presenter:
Prasannakumar
Jitendra Nagar
MBA(AB) 1st Year
IABM, Bikaner
2. INTRODUCTION
01/25/13
Long term financing means raising of funds for long
term
IABM, Bikaner
Long term finance is used to
• Purchase fixed assets
• Replacement of old machines
• Purchase of new assets
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3. SOURCES OF THE LONG TERM
FINANCE
01/25/13
SHARES:
A share is a right to participate in the profits made by a
company while it is a going concern and in the assets of the
IABM, Bikaner
company when it is wound up
The unit of a corporate ownership is a share
Two types of shares
• Equity Shares
• Preference shares
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4. EQUITY SHARES
01/25/13
Equity shares are those shares which carry no preferential
right in the payment of dividend and refund of capital
IABM, Bikaner
Features
1. Risk capital
2. Variable market price
3. unstable dividend
4. Refund of captal
5. Right to control
6. Right to vote
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5. PREFERENCE SHARES
01/25/13
It is a share which carries preferential rights as
to the payment of dividend at a fixed rate either
free or subject to income tax and as to the
IABM, Bikaner
payment of capital at the time of liquidation prior
to equity shareholders
Features
Claim on income
Claim on assets
No controlling power
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6. TYPES OF PREFERENCE SHARES
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Cumulative and non cumulative:
If the company has not paid dividend at fixed rate due to lack
IABM, Bikaner
of sufficient profit for that year then dividend go on in the
subsequent years before any dividend is distributed among
equity shareholders
Convertible and non convertible:
Holder have the right to convert their shares in to equity shares
within fixed period of time
Redeemable and Irredeemable:
The shares which would be repaid on a certain date in
accordance with the term of issue
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7. CONTD….
01/25/13
Participating and non-participating:
Carry the right to share in the surplus profit or assets of
IABM, Bikaner
the company
Cumulative Convertible Preference shares:
Issue for development, diversification, modernisation,
starting new projects
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8. DEBENTURES
01/25/13
It is a long term promissory note for raising long
capital
IABM, Bikaner
The purchasers of debentures are called
debenture holder
Features
1) Claim on income
2) Claim on assets
3) right to control
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4) Refund of debt
9. KINDS OF DEBENTURES
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1. Registered and Bearer
2. Secured and unsecured
IABM, Bikaner
3. Convertible and non convertible
4. Guaranteed
5. Collateral
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10. 01/25/13
Term loans- term loans are sources of long term
debt , they are generally obtained for financing
large expansion, diversification project
IABM, Bikaner
features-
1) Maturity of the loan
2) Primary security for loan
3) Rate of interest
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11. LEASE FINANCING
01/25/13
Many businesses lease assets as an
alternative to owning them
IABM, Bikaner
Business has the use of the asset and incurs an
obligation either to pay off loan or meet monthly
lease payment
At the end of lease term, residual value of asset
belongs to lease
Leasing is a form of debt financing
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12. TYPES OF LEASES
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1) Operating leases
IABM, Bikaner
2) Financial lease
3) Sale and lease back
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13. 01/25/13
Project financing- It is the scheme of financing
of a particular unit of economic unit in which a
lender is satisfied in looking in the cash flows
IABM, Bikaner
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14. VENTURE CAPITAL FINANCING
01/25/13
Definition- The early stage financing of new and
young enterprises seeking to grow rapidly
IABM, Bikaner
Features of venture capital-
1) Long term horizon
2) Participation in management
3) high risk
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15. 01/25/13
Types of venture capital financing
Equity financing
IABM, Bikaner
Debt financing
Income notes
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