List four major sources of external financing for the non-financial .pdf

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List four major sources of external financing for the non-financial firms in developed economies and provide a brief explanation of the relevant importance of those sources using the United States as an example. Explain the relevant importance of debt vs. equity financing and the reasons for the mass-media preoccupation with equity markets (2 points) Explain the relevant importance of marketable securities vs. non-marketable securities (1 point) Explain the relative importance of direct vs. indirect finance (1 point) Solution exteranal funds refers to the funds that firms obtain from outside of the firm, means the persons are not beonging to the firm. the major sources are: Debenture capital, Term laons,Deferred credit and leasing and Hire Purchase. Debenture capital: A debenture is a marketable legal contract whereby the company promises to pay its owner, a specified rate of interest for a defined period of time and the capital repayment on maturity date. Term Loans: these constitute one of the major sources of debt finance for a long term project. term loans are generally repayable in more than one year but less than 10 years. these loans are offered by financial institutions like IDBI, IFCI and ICICI etc. the sailent features of term loans are the fixed interest rates, and longer periods. Deferred Credit: This facility is offered by the supplier of a machinery , where the buyer can pay the purchase price in installments spread over a period of time. Bill Rediscounting, Supplier\'s Line of Credit, Seed Capital investment are the some of the examples. Leasing and Hire Purchase: Leasing is a contractual agreement between the lessor and the lessee, where in companies can enter into lease deal with the manufacturer of the equipment and the payment will be like their agreement. once the conrtact is over, the ownership should return to the owner. in hire purchae, the process is same, but once the payments are over the ownership transfered to the lessee. debt financing is the best example of external financing, where the company has to repay the capital along with predetermined interest to the provider. in equity markets, all the investors who bought share are called owners of the company and they carries some obligations and rights. these shareholders have voting rights in decision making. marketable securites can be easily convertible into currency, which are carrying liquidity feature, where as non marketable securities carries lesser liquidity. direct finance facilitates to control or to get some power or authority in the firm where as indirect finance dont have the facility..

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where as non marketable securities carries lesser liquidity.
direct finance facilitates to control or to get some power or authority in the firm where as indirect
finance dont have the facility.

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In the dynamic landscape of business operations, financing stands as a pivotal element for growth and sustainability. Particularly, the acquisition of equipment and access to lines of credit are crucial components that enable businesses to thrive. Streamline Business Financing's recent presentation delved into these essential aspects, shedding light on strategies and opportunities for businesses to leverage equipment financing and lines of credit effectively. This discourse aims to dissect and explore the insights provided during this presentation, highlighting the significance and implications for businesses seeking to expand their operations. Understanding Equipment Financing: Equipment financing serves as a strategic avenue for businesses to acquire the necessary tools and machinery required for their operations. Whether it's upgrading existing equipment or investing in new technology, this form of financing offers flexibility and efficiency. Streamline Business Financing emphasized the diverse range of equipment financing options available, including leases, loans, and equipment financing agreements. One notable advantage highlighted during the presentation is the preservation of capital. By opting for equipment financing, businesses can conserve their cash reserves for other critical expenses such as payroll, marketing, or unforeseen contingencies. Additionally, equipment financing often comes with tax benefits, allowing businesses to deduct interest payments and depreciation expenses, thereby reducing their overall tax liability. Moreover, Streamline Business Financing emphasized the importance of tailored financing solutions. Recognizing that each business has unique requirements, they highlighted the significance of customizing financing packages to align with specific needs and budgets. Whether it's a startup seeking to acquire essential machinery or an established enterprise looking to scale operations, personalized financing solutions can catalyze growth and productivity. Exploring Lines of Credit: In addition to equipment financing, Streamline Business Financing elucidated the importance of establishing lines of credit for businesses. Unlike traditional term loans, lines of credit provide businesses with a flexible source of capital that can be accessed as needed. This dynamic financing tool empowers businesses to navigate cash flow fluctuations, seize growth opportunities, and mitigate short-term financial challenges. During the presentation, Streamline Business Financing outlined the various types of lines of credit available, including secured and unsecured lines, revolving lines, and invoice financing. Each option carries its unique features and benefits, catering to different business models and objectives. By understanding the nuances of these financing instruments, businesses can make informed decisions that align with their strategic priorities.

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