Scribd
Upload
11 views

Sources and Uses of Long Term Funds

Uploaded by

ramilsuralta24
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
11 views

Sources and Uses of Long Term Funds

Uploaded by

ramilsuralta24
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 22

SOURCES AND USES OF

LONG-TERM FUNDS
LONG-TERM FUNDS

- are used for long-term investments, or sometimes


40

30

called
20 capital investments.
includes replacement of old equipment
expansion and buying a piece of land as site for future
expansion
LONG-TERM FUNDS

40

30

- can also be used to finance permanent


20

working capital requirements


LONG-TERM FUNDS

- Long-term funds should be financed by long-


term sources to minimized default risk. The
40

30

returns on long-term investments may not be


20

realized immediately and therefore, require


more patient sources of financing.
Opening a branch of a restaurant in a mall
which costs ₱15,000,000 can be an example of
that will need long-term sources of financing.
The costs of this investment may not be
30
40

recovered in a year, or worse, there is no


20

assurance that customers will patronize this


restaurant immediately and may take some
time before potential customers will get to
know it.
If the source of financing is a short-term loan,
say a six-moth loan, and the owner does nnot
have enough personal funds to shell put in case
30
40

of emergency, the new outlet may end up


20

defaulting with its obligations when the loan


matures. Therefore, this kind of expenditure, a
more patient source of financing is appropriate,
such as equity and long-term loans, or a
cobination of both
40

30
20
USES OF LONG-
TERM FUNDS
01
Long-term investments, e.g.
expansion of production capacity

02
Permanent working
capital requirement
SOURCES OF LONG-TERM
FUNDS

01 Equity infusion
04 Loans from lending
02 Internally-generated companies
funds
05
03 Bonds
Loans from banks
EQUITY

- Equity financing can be in the form of fresh


equity infusion from the owner of a single
30
40

proprietorship, or issuance of new ordinary


20

shares or perpetual preference shares for a


corporation
EQUITY

the most patient source of financing


40

20
the safest source of financing
30

not always available when a company


needs
INTERNALLY-GENERATED FUNDS

not all profits are distributed to


40

20
stockholders. Most of the profits are
30

re-invested and used by companies to


finance their needs.
INTERNALLY-GENERATED FUNDS

Based on corporation code of the Phils.


40

20
retained earnings cannot exceed 100%
30

of the value of the shares or sometimes


called paid-in capital.
LOANS FROM BANK/ BANK LOANS

Provides short-term and long-term financing


lower interest rates tha other financial
40

30
20
institutions
lot of requirements and borrower goes
through a process normally 1-3 months
LENDING COMPANIES

loans range from 2 to 5 years


30
40

20
can process loans faster
charge higher interest rates
BONDS/BOND MARKET

Bonds – these are debt investments where


30
40

an investor loans money to entity which


20

borrow the funds


BANKS AND NON-BANK
INSTITUTION
BANK
Financial establishments where money deposited
by customers earns interest and can be
withdrawn anytime when ordered by the
40

30

signatories.
20

To be able to pay for the interest for the money


entrusted by depositors, a bank invests it to
financial instruments or extends loans to
borrowers.
Land Bank of the Philippines
Rizal Commercial Banking Corporation
Producers Bank
Development Bank of the Philippines
Bank of the
40
Philippine Islands
30BDO Unibank, Inc.
20 United Coconut Planters Bank
China Banking Corporation
East West Banking Corporation
Metropolitan Bank and Trust Company
Philippine National Bank
NON-BANK FINANCIAL INSTITUTIONS

Can provide fund requirements of business


40

Their operations are not supervised by national


20
30

or international banking regulatory agency or


no full bank license.
Lending Companies
Pawnshops
Insurance40
firms
Government non-bank financial
30

institutions-GSIS & SSS


20
THANK YOU

You might also like