Business Finance
On the basis of the purpose to be served, there are three types of finance.
Long-term Finance: Funds invested in thousands for a long period, see more than five years are called long-term finance. This type of finance is used for acquiring fixed assets like land and buildings, plant and machinery, etc. The amount of long-term finance required depends on the nature a size of business. A manufacturing concern needs more long-tar finance than a trading firm. Similarly, large business firms require more long-term funds than small firms.
Medium- term Finance: Funds required for modernization of plant and machinery, introduction of a new product, adoption of new methods of production or distribution or advertising campaigns are called medium tar-finance. Medium-term finance is required for a period of two to five years.
Short- term Finance: This type of finance is required to hold stocks of raw materials and finished goods and to meet day-to-day expenses. Short-term finance is also known as working capital. It I required for a short period of unto one year. The amount of short-term finance required depends month nature of business, volume of binges and the time ape between commencement of production (or purchase of goose) and their sale. A trading firm needs more working capital whereas a manufacturing firmer quire more fixed capital. A rage enterprise needs more working capital than a small enterprise. If the time gap between production and sale is long, greater working capitalist required. For example, a hand loom requires more working capital than a power loom.