Importance of long term borrowing


Importance of long term borrowing

Mobilization of funds by business entities has so far been facilitated by owner's equity and through short term credit facilities. These sources may not be adequate especially when large amounts of money are needed on a long term basis to finance expansion of business.

Bonds are a common source of borrowing long term funds. Governments, not-for-profit organisations and business entities make use of bonds in raising capital. When bonds are issued by governments they are appropriately called Government Bonds or Government Stocks.

Other forms of long term capital finance are those arising out of long term lease contracts and hire purchase agreements. These involve acquisition of costly assets, payment for which is spread over a number of years

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