long term and medium term finance
Long-term finance reefs to the funds required for procuring fixed asses and for expansion and growth of business. Fixed assets include those asses which are used infusions to generate revenue. Land and buildings, plant and machinery, furniture and fixtures, etc. are examples of fixed assets. Long-term finance is required for a long void (say more than five years). It is also known as fixed capital. The amount of long-term finance required depends on the nature and size of businesses. For example, a manufacturing firm requires more long-term funds than a trading firm. Similarly, a large scale manufacturing enterprise requires greater long-term finance than a small scale firm.
Funds required for investment impermanent working capital and repayment of loans is called medium-term finance. It is also used for modernization of plant and machinery, introduction of a new product, adoption of new methods of production or distribution, advertisement campaign, etc. Medium-term finance is required for a period of exceeding one year but not more than five years. Need for medium-term finance often arises due to changes in technology and increasing competition. The amount of medium-term finance required depends when the nature and purpose of investment.