LONG TERM FINANCING

LONG TERM FINANCING

Sources of finance for business are equity, debt, debentures, retained earnings,term loans, working capital loans, letter of credit, euro issue, venture funding etc. These sources of funds are used in different situations. They are classified based on time period, ownership and control, and their source of generation.
SOURCES 
1-      Indenture
2-      Trustee
3-      Bonds
4-      Common and preferred  shareholders  


EXPLANATION

 Common shareholders

-            Common shareholders are the owner of company and as such they have certain rights. They have the right to elect the director of the company.

-            In the small firm common shareholder hold the position of the company chairman and also hold the elections of directors periodically (once in a year).

-            Each share holder has one vote.

 Preferred Shareholder

-            It is similar with the bondholder in some respect.

-            It is equity according to accountant but its debt and equity

-            Dividend was set when the stock was issued

-            Dividends is indicated as % age of a” par value “

-            No voting rights

Bonds

In finance, a bond is an instrument of indebtedness of the bond issuer to the holders
.
·        Long term contract

·        Generally issued with maturities in the long term of 20 to 30 years and in short terms 7 to 10 years

·        Agreement pay interest + principle amount on specific dates

·        It is advertised in the newspaper

·        Offered to general public and investors


TRUSTEE

an individual person or member of a board given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified.

INDENTURE

a legal agreement, contract, or document, in particular
OR/

Legal body form by the company who issuing the bonds to make a legal frame work in orger to solve the issue between the trustee and the firm

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