Analysis of Long-Term Finance Sources for Different Businesses

This report provides an in-depth analysis of long-term financing sources available to businesses, including bank loans, debentures, preference shares, and public deposits. It explores the similarities and differences in how various business structures—sole proprietorships, partnerships, private limited companies, and public limited companies—access and utilize these financial instruments. The report examines the advantages and disadvantages of each source, considering factors such as eligibility, interest rates, and risk profiles. The analysis highlights how the choice of financing impacts the business's ability to expand and achieve its financial goals. This report offers a comprehensive overview of financial accounting principles and practices, providing valuable insights into the strategic management of business finances. It also emphasizes the importance of accounting in making effective financial decisions.

ACCOUNTING OF
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
Source of long-term finance similarities and difference in different businesses.........................2
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6
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INTRODUCTION
Accounting is the tool through with owners can make effective decision related to
finances in the business. With the help of accounting the organization can main the records in
systematic manner and also able to analyse the information of the company (Brown and et. al.,
2019). This report will determine the sources of long-term financing to the different types of
organization for their expansion with their existing and new product in the market.
Source of long-term finance similarities and difference in different businesses
There are many sources from which any organization whether it is small-medium or large
can get the finance easily (Fowowe, 2017). There are two types of finance short-term and long-
term. Short-term finance are those which have to repay in a short period which is less than a
year. Whereas the long-term finance are those financial instrument which are for more than a
year. The businesses make use of long-term finance as per their needs in achievement of
organizational goal. There are also similarities when different businesses make use of long-term
finance for their expansion.
The sole proprietor businesses is own and control by a single person so most of the sole
perpetrator are taking long-term finance in the form of bank loan.
Debentures
This is an amount of outsiders which a company is holding for period of 12 months or more than
that. This debt is presented as non-current liability for the company in its balance sheet
statement. Debentures are one of the long term debt for the company which are issued by the
company to prevent the fund.
Difference:
Sole Prop. Partnership Private Ltd. Public Ltd.
The sole traders are
not legalized to issue
such kind of amount
from outside the
business. As they are
not having any kind
The company how
are being formed by
partners are also not
reliable to take such
external finance in
the company. As
The private companies
are liable to issue
debentures and bonds
which are helpful for
the company to
maintain their assets
The corporation and
government can
issue the debentures
as their long term
liability which can
be more than 10
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of shareholders, and
they use to invest
their own money in
the business.
they are investing
their money and if
they want any
additional money
then they prefer
taking that from
bank.
and also redeem their
reserve. They are
making use of
debentures under the
companies act 2013.
years. Yet the public
company also may
need of approval of
its shareholders to
borrow any kind of
money.
Similarity: the debentures are borrowed by private companies as well as public companies
whenever they are in need of money. Whereas the sole traders and partnership are not having any
similarities to debentures type of external funding source.
Bank loan: This is a type of finance which are used by different businesses to invest in their
businesses for better growth and expansion (Cumming and Groh, 2018). This is an long term
finance source for all kind of organization for which they have to pay a interest in return.
Difference
Sole Prop. Partnership Private Ltd. Public Ltd.
There is particular
limit set by the bank
for the sole
proprietor, and they
uses to provide the
fund according to that
limit. Mainly in the
sole trade the bank
uses to check their
credit scope.
For partnership firm
the bank loan are
also provided for
particular time
frame, and they have
to repay the amount
in that time. In this
both the partnership
solvency and credit
scope are checked
before allotment of
fund.
The private companies
are able to take the
bank loans at the fixed
rate of interest which
is set by bank and it is
easy for them to invest
a large amount at same
time with the help of
this external financial
source.
Bank loan are also
easily available for
the public enterprise
as this are governed
by government and
to sustain in the
market the bank have
to provide them
loans when they are
in need.
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Similarity: The sole traders, partnership business, private limited companies as well as public
limited companies all are taking such kind of liability from outside the business (Alford and
Greve, 2017). As bank loans are one of the best long -term finance for all types of businesses in
which company can borrow large amount easily. The uses of bank loan is mainly for long-term
for every business no business use the loans for short term.
Preferences shares: this are kind of external source of finance for different businesses in this the
amount is generated by the public by issusing of preference share to them. In this the
shareholders are have advantages to get fixed ratio of dividend and get the capital after liability
of businesses are being settled.
Difference
Sole Prop. Partnership Private Ltd. Public Ltd.
The sole proprietor
can not issue
preference share as
per laws. They can
only take other
liability from the
market.
The partnership
companies are also
not eligible to issue
any kind of shares in
the market for
generating finance.
As per the laws of
companies act the
private company can
issue the preference
shares and redeemed
after fixed period.
The public company
are also eligible to
issue the preference
share to generate the
fund within the
company.
Similarities: both private and public company are applicable to issue the preference shares and
generate finance when they are want. This both are being similar to issues whereas the sole
traders and partnership are not being similar to this because they can not able issue preference
shares.
Public deposit: This fund is being directly raise from the public as compared to bank its rate is
cheaper yet are on higher rate of risk (Benzidia, Luca and Boiko, 2021).
Sole Prop. Partnership Private Ltd. Public Ltd.
The sole traders are
not given the
The partnership firm
are also being
The private limited
company are also not
The public and
government control
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authority to generate
their fund from
public as they are
working on small
scale, so they invest
their own fund in
their business.
prohibited to take
such external source
of finance.
able to accept the
deposit of the public
as it is not authorized
to them to take fund
from public deposit.
companies can easily
take benefits of
public deposit.
Similarities: as all the businesses are not able to access the public deposit external source of
finance except public company so this is simile in sole trade, private and partnership company
that they can not use this finance.
CONCLUSION
This report concludes that the different businesses have different opportunities and
limitation regarding issuing the finance in them. Their are number of similarities and difference
between them as well.
5

REFERENCES
Books and Journal
Alford, J. and Greve, C., 2017. Strategy in the public and private sectors: Similarities,
differences and changes. Administrative Sciences. 7(4). p.35.
Benzidia, S., Luca, R.M. and Boiko, S., 2021. Disruptive innovation, business models, and
encroachment strategies: Buyer's perspective on electric and hybrid vehicle
technology. Technological Forecasting and Social Change. 165. p.120520.
Brown, C. and et. al., 2019. Accounting for business adaptations in economic disruption
models. Journal of Infrastructure Systems. 25(1). p.04019001.
Cumming, D. and Groh, A.P., 2018. Entrepreneurial finance: Unifying themes and future
directions. Journal of Corporate Finance. 50. pp.538-555.
Fowowe, B., 2017. Access to finance and firm performance: Evidence from African
countries. Review of development finance. 7(1). pp.6-17.
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