What are the sources of finance?

Answer:

The sources of finance refer to the options that are available to companies for funding capital for their business needs or expansions.

The sources can be:

• Short-term sources of finance, or
• Long-term sources of finance.

The major sources of finance available to a company include:

• Issuance of common stock
• Issuance of preferred stock
• Issuance of debt instruments like bonds and debentures
• Borrowing loans from banks or other financial institutions.

In order to determine which source of finance is better for the company, it needs to determine the cost of each source of capital and relevant risks associated with such type of security.