Long Term Sources of Finance in financial management?

There are different sources of long term finance which can be used to generate the finance for the business for long period of time. One of the most commonly used is Equity Shares, the issuing of equity shares is the most important source for raising the long term capital by the company. These shares are the best source because they are only paid back on winding up of company. Equity shareholders are the real owners of the company. Equity shareholders get dividend when the company is earning profits. A company can now issue different classes and kinds of shares to raise its owned capital. The kind of shares will be issued according to the needs of the company and preferences of the investors. There are two types of shares one is right shares. A public company may increase its subscribed capital by issue of right shares. Right shares are offered to the shareholders in proportion to their present holding often at a price which is less than the currently quoted price on the stock exchange.

The other source is debentures a company also raises long term finance through borrowing. These loans are raised by the issue of debentures. A debenture is an instrument issued by a company to acknowledge the loan taken by the company under its common seal.

· Secured and unsecured notes

· Convertible notes

· Fixed deposit loans

· Mortgages

· Eurobonds

· Interest rates swaps

· Forward rate agreements (FRA's)

· Interest only futures

· Option on future contracts.

· Convertible notes

· Subordiniated debt