Evaluate the Output of the Process and the Quality Gateways

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Module: Financial Management and Control Unit: Sources of Finance and Costing Concepts Lesson: Long-Term Sources of Finance
© Resource Development International Ltd. (RDI) 2009

Long-Term Sources of Finance
Introduction

Page 1 of 7

Accounting is an essential function in any business - whether it is a sole trader or a multinational corporation. It involves two key concepts: Bookkeeping - where a detailed recording process is used to identify every financial transaction that takes place involving an organisation. This is a painstaking process requiring an excellent eye for detail, and measures the financial effects of economic activity. Financial reporting - where details of the financial activities of an organisation are …show more content…

When any organisation analyses their financial requirements, they need to answer four fundamental questions: 1. Where will the finance come from? 2. How long do we need to use it? 3. How much money do we need? 4. In what ways will the finance be used? Sources of finance can be categorised as being either external or internal. The time period in which finance may be needed is an important factor in planning the use of finance. The time periods for sources of finance can be categorised as: Short-term (less than 1 year). Medium-term (between 1 and 5 years). Long-term (over 5 years).

Investigate the sources of finance within your own organisation, or one that you are familiar with, and make a list, according to whether they are internal/external and short, medium or long-term sources of finance. What are they needed for?

© Resource Development International Ltd. (RDI) 2009

You will have found that the sources of finances that you have identified will vary between organisations because their financial needs will differ. However, reference to Figure 1.1.1, will enable you to identify the main sources of finance available to organisations, both internal/external and their allocated time periods.

Figure 1.1.1 - Sources of finance and their associated time periods

We can look at each of these sources in turn in the next section.

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© Resource Development International Ltd. (RDI) 2009

Long-Term Sources of Finance
Short-term finance

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