Question

Explain the classification of sources of funds on the basis of period.

Answer 1

The sources of funds on the basis of the period can be classified into three parts :

1. Long-term sources: It includes those sources which are required by the business firms for a period exceeding 5 years. For example shares, debenture.

2. Medium-term sources: It includes those sources which are required for a period of more than a year but less than 5 years. For example public deposits, borrowings from Commercial Banks.

3. Short-term sources: It includes those sources which are required by business firms for a period of less than 1 year. For example trade credit, commercial papers.