Q.Explain any four owned and borrowed sources of long-term finance available to a company.

This question requires covering a mix of owned and borrowed long-term sources with genuine explanation of each. …

A company has access to several long-term sources of finance, some owned and some borrowed. Four important examples are explained below.

Equity shares (owned): Equity shares represent the ownership capital of a company. Equity shareholders receive a variable dividend depending on the profit earned and the board's decision on distribution, enjoy voting rights in the company's general meetings, and bear a residual claim on assets and profit, being paid only after every other claim is settled. Equity capital is permanent, need never be repaid during the company's life, and carries no fixed obligation, making it a strong cushion against business risk, though raising it dilutes ownership among a wider group of shareholders.

Preference shares (owned): Preference shares carry a fixed rate of dividend and a preferential claim over equity shareholders both for payment of dividend and for repayment of capital on winding up. In exchange for these preferences, preference shareholders generally have no voting rights except in special circumstances. Preference capital gives a company a way to raise owned funds while keeping the return promised to those investors capped at a known, fixed rate.

Debentures (borrowed): A debenture is a certificate of loan through which a company borrows money from the public or institutional investors, promising a fixed rate of interest, payable regardless of profit, and repayment of the principal on a specified redemption date. Debenture holders are creditors, not owners, and so have no voting rights, though secured debentures give them a specific charge on the company's assets as protection if the company defaults. Debentures let a company raise long-term funds without diluting ownership, but they create a fixed financial obligation that must be honoured every year. …

Students sometimes give only a one-line definition for each source without explaining the DISTINGUISHING features (voting rights, fixed vs variable return, repayment obligation) that the question is really testing — always bring o …