What Are The Types Of Long- Term Finance - 971 Words

A high amount of investment is required to enter in a new venture. The main types of long- term finance that are available to make investment in venture capital business includes both internal and external source of finance. Internal source means issue of share capital, debentures, retained earnings, disposal of any surplus asset that is not needed anymore. However, external sources include bank loans, investors’ loan and loans from financing institutions. Projections are the numerical forecasts that the investor is actually buying and investing in (Dalabeeh, 2013). The analysis of the projection (financial statements) is essential to make sure that the projections are practical, attainable and are reliable with the overall†¦show more content†¦Once the decision to invest is taken the next step is to decide the mode of finance suitable to the company based on its analysis, and then they have to decide whether the company has sufficient internal finance available for making investment, or it has to go for external sources such as bank loans. By examining the cash flow critically one can access the company’s policies and procedures related to cash collections, payments, and policies related to financing activities, as well as operating, investing activities. In the analysis of balance sheet there are three areas to be examined assets (fixed and current) Liabilities (fixed and current) and Equity (share capital, Retained earnings, other reserves). Every item in each area provides specific financial information. Income statement incl udes expenses and income detail (including tax expenses) related to the current period. Although it does not reveal much about the company’s current financial condition, but instill it does provide indications of its future viability. The balance sheet, profit and loss and cash flow statements are interrelated and they all need to study with one another for a more detailed bigger picture of the financial situation of the company. For example company makes sales (PL) which creates debtors (BS) who pay