What represents a favorable source of meeting long term financing? Answer Expert Verified. Retained earning is one such source for long-term financing needs of the company. It is accumulated over a long period and is favourable source in such case.
What is a common source of long-term financing?
Long-term financing sources include both debt (borrowing) and equity (ownership) . Equity financing comes either from selling new ownership interests or from retaining earnings. Financial managers try to select the mix of long-term debt and equity that results in the best balance between cost and risk.
What do businesses match their long-term capital needs to?
Businesses match their long-term capital needs to: their long-term goals and objectives .
Which one of the following is the most widely used source of short-term funding?
The main sources of short-term financing are (1) trade credit , (2) commercial bank loans, (3) commercial paper, a specific type of promissory note, and (4) secured loans.
Which of the following is a long-term debt obligation of a corporation or government?
A debenture is a long-term debt instrument issued by corporations and governments to secure fresh funds or capital.
What are the 5 sources of finance?
- Personal Investment or Personal Savings.
- Venture Capital.
- Business Angels.
- Assistant of Government.
- Commercial Bank Loans and Overdraft.
- Financial Bootstrapping.
- Buyouts.
What is the best source of financing?
Bank loans . Bank loans are the most commonly used source of funding for small and medium-sized businesses. Consider the fact that all banks offer different advantages, whether it’s personalized service or customized repayment. It’s a good idea to shop around and find the bank that meets your specific needs.
What are examples of long-term debt?
- Bonds. These are generally issued to the general public and payable over the course of several years.
- Individual notes payable. ...
- Convertible bonds. ...
- Lease obligations or contracts. ...
- Pension or postretirement benefits. ...
- Contingent obligations.
Why do businesses have long-term financing?
Long-term financing involves the choice between debt (bonds) and equity (stocks). Each firm chooses its own capital structure, seeking the combination of debt and equity that will minimize the costs of raising capital. ... This is because bondholders do not share in the profits .
Why do we need long-term finance?
Firms tend to match the maturity of their assets and liabilities , and thus they often use long-term debt to make long-term investments, such as purchases of fixed assets or equipment. Long-term finance also offers protection from credit supply shocks and having to refinance in bad times.
Which of the following is a short term source of funds Mcq?
Short term sources are Commercial papers . Commercial paper is a money-market security issued (sold) by large corporations to obtain funds to meet short-term debt obligations (for example, payroll) and is backed only by an issuing bank or company promise to pay the face amount on the maturity date specified on the note.
What are the factors in selecting the sources of short term funds?
- The amount required. ...
- Type of expenditure/Purpose for which the capital is required. ...
- The length of time for which the money is required. ...
- The size, status and ability of the business to borrow. ...
- The business’s current level of gearing.
What are the different sources of short term funds and long term funds?
- Overdraft Agreement. ...
- Accounts Receivable Financing. ...
- Customer Advances. ...
- Selling Goods on Installment. ...
- Long-Term Loan from a Bank. ...
- Retain Profits. ...
- Issue Equities and Debentures.
What are two major forms of long-term debt?
The main types of long-term debt are term loans, bonds, and mortgage loans . Term loans can be unsecured or secured and generally have maturities of 5 to 12 years. Bonds usually have initial maturities of 10 to 30 years. Mortgage loans are secured by real estate.
Is accounts payable long-term debt?
Another common type of short-term debt is a company’s accounts payable. ... Most leases are considered long-term debt , but there are leases that are expected to be paid off within one year.
Where is long-term debt on the balance sheet?
Long term debt is the debt taken by the company which gets due or is payable after the period of one year on the date of the balance sheet and it is shown in the liabilities side of the balance sheet of the company as the non-current liability.
