Financing

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Recommended: Describe some of the differences between equity financing and debt financing

FINANCING
Financing is the act of providing funds for business activities, making purchases or investing. It entails sourcing of funds or capital to meet necessary goals. Financing involves sourcing, obtaining and provision of funds or asset. Financing is done at various levels in the economy, starting from small businesses to multinational businesses.
The process whereby companies seek for external help in other to enable it carry out its operation very well is termed Financing. Financial institutions and banks are in the business of financing as they provide capital to businesses, consumers and investors to help them achieve their goals. The use of financing is vital in any economic system as it allows businesses and individuals to accompany their objectives with the available resources they have, funds financed can be used to expand their businesses, and in the case of large businesses it can be used to finance capital projects.
CLASSIFICATION OF SOURCES OF FINANCE.
The sources of finance of a business can be classified in various ways:
(1) Basic classification between debt and equity.

(2) Classification of finance sources as to maturity, that is, short term, medium-term and long term sources. Short-term sources are financing sources of up to 1 year duration. Medium-term sources are financing sources of 1 year to 5 years duration. While long-term sources are financing sources of 5 years or more duration.

(3) Classification as to the provider of finance.
BASIC SOURCES OF FINANCE: DEBT VS EQUITY
The fundamental classification of finance sources is the sub division: Debt financing and Equity financing.
1. Debt Financing: -Debt financing involves borrowing funds from creditors with the stipulation of repaying the borrowed fu...

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...version.
FEATURE OF A CONVERTIBLE SHARE
The convertible feature adds an incentive to investors who hold an interest in purchasing common stock, but want the lower risk associated with preference stocks. This feature allows the holder to convert his preference shares into a specified number of common shares at a future date.
6. NON-CONVERTIBLE PREFERENCE SHARES
Preference shares, which are not convertible into equity shares, are called non-convertible preference shares. There shares, cannot be converted into equity shares from preference shares at the option of the share holder. Non- convertible Share is the opposite of the Convertible share, meaning unlike the convertible shares that can be converted to a preference share at a predetermined date, the non-convertible share cannot be converted. The holder of non-convertible shares have no right to conversion.

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