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Sources of Funds for Financial Management: Short-Term and Long-Term Financing

Learn about the different sources of funds used by firms for meeting monthly expenses, dealing with emergencies, expanding inventory, developing new products, and more. Explore short-term financing options like trade credit, promissory notes, and factoring, as well as long-term financing options like term loans, bonds, and equity financing. Understand the importance of debt and equity capital in funding business operations.

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Sources of Funds for Financial Management: Short-Term and Long-Term Financing

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  1. Chapter Financial Management 18 Condensed

  2. Sources of Funds&Financing

  3. Short-Term Funds Meeting monthly expenses Unanticipated emergencies Cash-flow problems Expanding current inventory Temporary promotional programs Long-Term Funds New product development Replacing capital expenditure Mergers or acquisitions Expansion into new markets Building new facilities Why Firms Need Funds

  4. Sources of Funds • Debt Capital • Equity Capital

  5. Types of Financing • Short-Term • Long-Term

  6. Short-Term Financing

  7. Short-Term Trade Credit 2/10, net 30 Promissory Notes Family/Friends Banks, etc. Secured Loan Unsecured Loan Factoring Commercial Paper Sources of Funds

  8. Different Forms of Bank Loans • Secured Loans (collateral) • Pledging (accts receivable) • Inventory Financing (raw materials) • Unsecured Loans • Line of Credit (not guaranteed) • Revolving Line of Credit (guaranteed) • Comm’l Finance Companies • Non-banks

  9. Long-Term Financing

  10. Long-Term Debt Term-Loan Bonds Secured Unsecured Equity Stock Retained Earnings Venture Capital Sources of Funds

  11. Long-Term Debt Financing

  12. Term Loans

  13. Bonds • Classes • Unsecured • Debenture • Secured • Mortgage

  14. Long-TermEquity Financing

  15. Sources of Equity Financing Retained Earnings Internal Sources Owner Contributions Sale of Partnerships Equity Capital Venture Capital External Sources Public Sale of Stock

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