Welcome

Presentation on
‘Long Term Financing’
We Are Team Prescient:
Puja Deb {18304032}
Asiful Hasan {18304033}
Zubair Abdullah {18304121}
Sourav Bhattacharjee {18304053}
Fabiha Rashid {18304050}
Sumaiya Afroze {18304112}
Long term Financing – Meaning & Purpose

 Long term financing is a form of financing that is provided for a period of more
than a year. Long term financing is also known as Fixed Capital Finance. Below
are the purpose for which long term finance is availed:
o To finance fixed assest
o Expansion of companies
o Increasing facilities
o Construction of project on a large scale
o Acquisition of companies.
 Long term finance

Source Use
 Equity  Fixed assets
i. Personal investment i. Building
ii. Other people’s money ii. Equipment
 Medium/long term bank loans iii. Plant and machinery
 Leasing iv. Vehicle fleet
 Hire purchase v. Land
 Common stock
 Preferred stock
 Retain earning
 Debenture
Bonds and Debentures

 Bonds: Bonds is a financial instrument whereby the issuer of the bond raises
capital at a certain cost for certain period of time which is secured by physical
assets and pays back the principle amount on maturity of the bond.
 Here are some types of bond:
I) Zero-coupon bond
II) Deferred coupon bonds
III) Step-up Bonds
IV) Step-Down Bonds
V) Floating rate bonds
 Debentures
 Debenture: Debenture is a type of debt instrument of borrowing money that is
not secured by physical assets. Here are some types of debentures:
 On the basis of security:
1. Secured Debentures and
2. Unsecured Debentures
 On the basis of Redemption:
1. Redeemable and
2. Non-redeemable Debentures
 On the basis of Records:
1. Registered debentures and
2. Bearer debentures
 On the basis of Convertibility:
1. Convertible debentures
2. Non-convertible debenture
 Bonds and Debentures:

Debenture Bonds
o Issued by Companies o Generally issued by Government,
Corporations

o Not secured by physical assets or

collateral o Secured

o Higher interest rate o Low interest rate when compared to

Debentures
 Common Stocks:

 Common stock is a security that represents ownership in a

corporation. First ever common stock was established in 1602 by
the Dutch East India Company and introduced on The Amsterdam
Stock Exchange.
 Types of share:
 Primary share
 Secondary share
 Advantages and Disadvantages
Of
Common Stock
Advantages Disadvantages
 Control of company is not surrendered to  Cost of raising capital through debentures is
debenture holders because they do not have high stamps duty.
voting rights.  Common people cannot buy debenture as they
 Yield huge gains. are of high denomination.
 An ideal investment.  They are not meant for companies earning grater
 Interest on debentures is an allowable than the rate of interest which they are paying on
expenditure under income tax act, hence the debentures.
incidence of tax on the company has surplus  High risk investment.
funds.
 Lack of control.
 Easy buying and selling process.
 Last one to get paied
 Debenture can be redeemed when company has
surplus funds.
 Meaning of the preference shares
Preference shares are those, which enjoy the following two
Preference preference rights:
Dividend at a fixed rate or a fixed amount on
Share these shares before any dividend on equity
shares.
Return of preference share capital before the return of
equity share capital at the time of winding up the
company.
 Retained Earnings

 In accounting, retained earnings refers to the portion of net income which is

retained by the corporation rather than distributed to its owners as dividends.

 Similarly, if the corporation takes a loss, then that loss is retained and called
variously retained losses, accumulated losses or accumulated deficit.

 Retained earnings and losses or accumulative from year to year with losses
offsetting earnings.
 Other Sources

 Loans from financial institute:

The term loan is a long term secured debt extended by banks and financial institutions to the
corporate sector for caring out their long term project maturing between 5 to 10 years.
 Venture Funding:
Venture funding is a funding process in which the venture funding companies manage the
funds of investors who want to invest in new business.
 Leasing:
A financing arrangement that provides a firm with an advantages of using
an asset, without owing it, may be terms as leasing.
Thanks!