For and right mixture of finance. The process


 

For entrepreneurs sources of finance are the vastest area, perhaps
it is the hardest of all the hard work or efforts. Meanwhile it is known that
there are different ways of financing which the company can choose from; the
main challenge is choosing the right source at the right time and right mixture
of finance.  The process of choosing appropriate
source of finance needs extent analysis of every source available, for evaluating
and comparing different sources of finance the company needs to know different
characteristics of the each source.

 

 

For classification of sources of finance there are different characteristics,
on the basis of time, on the basis of ownership and control and on the basis of
source of generations lets study them in more details.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

ü  ON
THE BASIS OF TIME-PERIOD

Companies required sources of finance based on the time period,
these periods can be categorised in following three ways

LONG
TERM SOURCE OF FINANCE

These are the sources which the company can raise funds for the
long period of time more than five years like maybe for ten years, twenty years
or based on the factors. For Building, land, plant and machinery etc. companies
needs long term source of finance. Some part of working capital which will be
with the business is also finance with the longer term sources

Some examples of long term sources of finance

     
Debenture

     
Long
term loans from banks, government and financial institutes

     
Share
capital

     
Retain
earnings

     
Preference
capital

     
  Assets
securitization

 

 

 

MEDIUM
TERM SOURCES

These are sources which companies needs for medium terms like three
to five years and they are mainly used in two circumstances One when long term
sources of finance is not available for time being and secondly when some expenditures
needs to written off over period of three to five years like deferred revenue
expenditure for example advertisements.

ü  Examples of Medium Term Sources   

     
Medium
term loans from commercial banks, government or any financial institutes

     
Lease
finance

     
Debenture

     
Hire
purchase finance 

x

Hi!
I'm William!

Would you like to get a custom essay? How about receiving a customized one?

Check it out