FM2 Long Term Financing

What is long-term financing?

• Financing with a term of less than one year

• Financing with a term of more than one year

• Financing obtained from family and friends

• Financing provided by venture capitalists

Which of the following is NOT an example of long-term financing?

• Bank loans

• Trade credit

• Bonds

• Equity financing

What is a characteristic of long-term debt financing?

• No collateral

• Short repayment period

• Fixed repayment schedule

• Low risk to lenders

Which entity typically provides long-term financing to corporations?

• Commercial banks

• Trade creditors

• Suppliers

• Customers

What is the primary purpose of long-term financing?

• To meet short-term cash needs

• To finance day-to-day operations

• To fund capital investments

• To cover operating expenses

Which of the following is a form of equity financing?

• Bank loan

• Corporate bonds

• Preferred stock

• Mortgage

What is a disadvantage of long-term financing through issuing bonds?

• Limited access to capital markets

• Fixed interest payments

• Decreased financial leverage

• Potential bankruptcy risk

What is the benefit of long-term financing for businesses?

• Lower interest rates

• Shorter repayment periods

• Enhanced liquidity

• Stability and predictability of cash flows

Which financial instrument is commonly used for long-term financing by governments?

• Commercial paper

• Municipal bonds

• Treasury bills

• Corporate bonds

What is a characteristic of long-term financing through equity?

• Fixed repayment schedule

• Interest payments

• Ownership dilution

• Collateral requirement