Question

Identity major forms of long-term financing.

Answer 1

Long-term finance can be defined as any financial instrument with maturity exceeding one year (such as bank loans, bonds, leasing and other forms of debt finance), and public and private equity instruments.

Answer 2

Major forms of long-term financing include early-stage investors, reinvesting profits, borrowing through banks or bonds, and selling stock. Business owners must consider terms of repayment and investment goals. These methods are crucial for raising capital and making informed investments.

Step-by-step explanation:

The major forms of long-term financing for businesses include:

1. Early-stage investors: Individuals or entities that provide capital to businesses when they are in their initial stages of development.
2. Reinvesting profits: Using the earnings generated by the business, which are not distributed to shareholders, to finance future projects or expand operations.
3. Borrowing through banks or bonds: Acquiring funds by taking loans from financial institutions or through the issuance of bonds, which is a form of a financial contract where the issuer agrees to pay back the borrowed amount with interest over a specified period.
4. Selling stock: Raising capital by issuing shares of the business, which represent ownership in the company and are sold to investors.

When business owners choose these sources of financial capital, they also decide on the terms of repayment and the associated costs. Investors should consider their goals, risk, and the expected return when they invest in financial assets like bonds, stocks, and mutual funds.

Understanding these forms of long-term financing is essential for both raising capital and making informed investment decisions.