Introduction to Long-Term Financing

Question 1

Identify major forms of long-term financing.

Answer 1

1. Long-term notes
2. Financial (Capital) leases
3. Bonds
4. Preferred Stock
5. Common Stock

Question 2

Describe the concept of long-term financing.

Answer 2

Long-term financing involves obtaining funding through sources for which repayment is not due within one year, including sources which do not require any “repayment” (e.g., common or preferred stock). These sources of funding constitute the capital structure of a firm.