Evaluation of Long-Term Finance Alternatives Article

Evaluation of big-Term Finance Alternatives - Article ExampleA firm whoremaster opt in for either kind of long-term financing like issue of securities, term loans, inside accruals, suppliers credit scheme and equipment financing. There are as well as some additional options of funding like deferred credit, unlatched loans and deposits and venture bully financing.Types of Capital Three types of capital can be issued by firms namely justness capital, taste capital and Debenture capital. All three of them vary in terms of risk, return and the anatomy of ownership.Equity Capital - Equity share holders are the actual owners of the business. They enjoy all the profits of the come with that are residual in nature and this is after paying the preference shareholders and all the other creditors, if any. The obligation restriction of integrity share holders is limited to the amount of share capital contributed by them. The bell of equity capital is higher than all other forms of capital. It is to be noted that equity dividends are not tax-deductible expenses and excessively the costs of issue is very high.Long term financing is essential for any operating firm. Long term finance are necessary for investments such as modernization or expansion of brisk firms and also for working capital management. The funding process should be a trade-off between the cost of funding, the risk factor involved and the expected returns. This is in order to maintain a reasonable fan out is maintained for the firm.References1. Financial Management for Managers, published by ICFAI center for Management Research, Ref no FMM - 04200405. election Capital - Though similar to equity capital, preference capital has no obligatory payment to the preference shareholders. Even the preference dividend is not tax deductible. An advantage that the preference shareholders have is that they earn a bushel rate of return for their dividend payment. Debenture Capital - Debenture is nothing bu t a marketable juristic contract whereby the company promises to pay its owner, a specified rate of interest for a defined flow of time and to repay the principal at the specific date of maturity. These are usually secured b y a charge on the immovable properties of the company.A firm can also raise capital from the primary market by way of way out securities. Different ways of issuing securities exist.Public abridge Companies issue securities to the general public in the primary market and thereby get them listed in the express exchange. These securities are then traded in the secondary market.Rights Issue When a firm issues additional equity capital. It has to eldest offer such securities to the existing shareholders on a pro rata basis. Such a method of issuing securities is called as Rights Issue.Private Placement This method of financing involves direct selling of securities to a limited routine of institutional or high net worth investors. The delay in going public and also the expenses involved can be avoided in this case. The major advantages here are the easy access to any company, fewer formalities and lower issue cost.