Chapter 10.2, Problem 1R

To determine

To state: The importance of different types of financing.

Explanation of Solution

1) Debt financing- It is the opposite of equity financing. In it, the ownership lies with the lender of the money. Debt financing just requires borrowings from lender for a decided time and pay it back with interest.

2) Short term financing- It is a form of debt financing. It is important as it is the base of starting any business if one does not have much funds. The repayment of the loan is generally to be done within 12 months.

3) Intermediate term financing - It is a type of financing which allows the repayment of debt or loan to be done in more than 1 year and less than 10 yrs. It becomes important as it offers adequate time to make the repayment.

4) Long term financing - It is a type of debt financing which focuses on long term strategies of a company and provide a maturity period of more than 1 year for a debt or loan taken.

Economics Concept Introduction

Introduction: Financing is the procedure through which the companies are granted money to help them use such money in carrying out their businesses.