Final answer:
A three-year bank loan is considered long-term financing and liability funding, as the obligation exceeds one year and constitutes a legal repayment commitment for the company.
Step-by-step explanation:
If a company secures a three-year bank loan, it is considered long-term financing. Short-term financing generally refers to obligations that are due within one year. The loan in question falls outside this time frame, hence it is categorized as long-term.
This type of financing provides capital that the borrowing entity commits to repaying over a period that exceeds one year. In this context, the loan is also considered liability funding, as it represents a legal obligation for the company to make repayments with interest over the agreed term.
Companies often weigh the options of long-term financing versus alternatives such as issuing bonds or stock. Bank loans and bonds require scheduled interest payments, while stock issuance dilutes ownership but doesn't require scheduled repayments.