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What is the preferred order for corporations obtaining long term financing?

What is the preferred order for corporations obtaining long term financing?

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Answer #1

THe first source of long term financing is Equity shares. They represent ownership and there is no liability for payment of interest/ dividend on capital raised.

Next is preference shares. They are a mix of debt and capital. While the rate of dividend is fixed, the company has an option to defer the payments.

Third is corporate bonds: A corporate bond is a long-term debt instrument that generally has a maturity date after one year after their issue date at the minimum. They carry a fixed rate of interest. However they may be issued with a call option.

LOng term loans from banks and financial institutions are the final source of long term financing.

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