Explain The Long Term Finance.

Long Term Finance: The long term finance is generally required for the period of more than ten years. It is used to finance the fixed assets like lands building, machinery, furniture and other items of permanent nature. It is generally needed at the start of big business.

Sources of Long Term Finance:

1. Retained Profit: The profit retained in the business can build up funds for the business. The retained profit can be use in the business or may be invested to earn further income.
2. Shares: The companies' rages maximum amount of capital through the issues and sale of shares. The companies' ordinance 1984. Allows the company to issue the ordinary shares only.
3. Debentures: A company also raises long term finance through borrowing. These loans are raised by issue of the debentures. A debenture holder is the creditor of the company.
4. Mortgage: The loans can be raised on the security of immoveable property like land and building. The property can be soled in case of default.
5. Industrial and financial institutions: A company also meets its medium and long term meets from industrial and financial institution. Theses institutions include I.D.B.P, PICIC, NIT and Bankers Equity Limited (BEL). Theses institutions help in the promotion new companies, expending and developing of existing companies, such institutions are helpful for the purchase of modern machinery in local and foreign currency.