Definition: The Sources of Long Term Finance are those sources from where the funds are raised for a longer period of time, usually more than a year. Long term financing is required for modernization, expansion, diversification and development of business operations.
Generally, the companies resort to the sources of long-term finance when they have an inadequate cash balance and need capital to carry out its operation for a longer period of time.
Objectives of Long-term Financing
- To purchase new asset or equipment
- To finance the permanent part of the working capital
- To enhance the cash flow in the firm
- To invest in R&D operations
- To construct or build new construction projects
- To develop a new product
- To design marketing strategies or increase facilities
- To expand business operations
The long term financing could be done internally, i.e. within the organization or externally, i.e. from outside the organization.
The Internal Sources of long-term finance:
The External Sources of Long Term Finance:
Thus, the nature of business, the kind of goods produced and the technology being used in the organization, decides the source from where the finances could be raised.
Gaurav Kumar says
Tigist taye says
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