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Running Head: Long Term Financing Long Term Financing (Authors Name) (Institution Name) Long Term Financing Long term finance capital deficits for business funds are normally for periods exceeding one year while for short term financing capital deficit business funds are for lesser periods. It is common for all established corporations and new business entities where large or small to have some types of debts through out their business lives. Therefore these businesses usually have to depend on lenders for the expansion of their companies and for the procurement of equipment besides having to finance their operating capital to even out their cash flows. While long term debt financing is utilized for fixed assets, large capital investments, equipment purchase, construction projects and for the expansion of facilities.
The different types of long term debt can be secured debentures, unsecured notes, convertible notes, fixed deposit loans, mortgages, different types of bonds, interest rate swaps, forward rate agreements (Fra's), interest only futures, option on future contracts, convertible notes, subordinated debt and preference shares in long term financing. (Long Term Financing) Stock In the various financial markets through the issuance and distribution of shares, stock capital is raised by corporations. Any individual or organization that holds some share of stocks is therefore called a shareholder. This security signifies the ownership of the shareholders in a corporation and makes them claimants on their proportionate part of any corporations assets and earnings. The two main types of stocks are the common and preferred types with the common stock giving the right to the shareholder to cast his vote at the meetings of the shareholders and entitle them to also receive dividends.
Preferred stocks holders usually do not have voting rights but have higher claim value on assets as well as earning in comparison to common shares. An example in this context can be taken of preferred stock shareholders receiving their dividends before the common shareholders and have priority over receiving payouts in the case of the company in which they have invested get bankrupt and liquidated. (Stock) The issuance of shares is most beneficial to organizations because when they issue shares, organizations commit themselves to share a large portion of their income with the shareholders. However, the shareholders are also liable to bear the losses if any are incurred by the organization. However, investors who provide long term lending services to organizations are at no such risk as they would have to be returned the agreed upon capital and interest. If any organization is not profitable, than it has the option of not paying any dividend whereas if any organization has taken any loan, irrespective of its making profits or losses, it is liable to pay back the agreed upon capital with interest.
However, shareholders can rightfully claim a part of the corporations assets that is proportionate to the value of their share. References: Long Term Financing (Accessed: May 4, 2007) web Stock (Accessed: May 4, 2007) web
Free research essays on topics related to: assets, financing, shareholders, shares, long term debt
Research essay sample on Running Head Long Term Financing
