finance
overview
|
corporate news
|
corporate finance
|
m&a/jv
| insurance
market deals |
virtual library |
venture capital | enviro clearance
| personal finance |
faqs
Finance > Corporate Finance > Medium/Long
term purposes
Needs - Medium and long term purposes
At the time of setting up operations, undertaking of new activities,
expansion/modernisation of existing manufacturing facilities or to meet
the working capital requirements of a permanent nature (also known as
owners' stake in working capital), corporates need funds which cannot be
repaid in a hurry. The assets required for all these activities generate
income after a gap, but this stream of income lasts for longer time. The
corporates, therefore, need funds which can be paid over a period of time.
Such funds are called medium or long-term funds. The major external
sources for such funding are borrowings from Banks or Financial
Institutions (Term Loans),
issue of shares (equity and preference shares), issue of debentures or
bonds or raising fixed deposits from the public. In the case of existing
corporates, another source, which can meet these requirements, is the
retained earnings or the profit ploughed -back into the business. This
source of funds, however, is available only to corporates which practise
prudent management policies in operations to maximise profits, in tax
planning and in the distribution of income.