Question

Discuss the relationship of operation financing and long-term financing

Answer 1

Financing is a act of providing funds for business activities, making purchases or investing. Financial instituions and banks provide capital to businesses, consumers and investors.

There are various types of financing which includes short term financing, long term financing, equity financing, operation financing, venture capital, angel funding, debt financing, asset based lending, real estate financing, private equity placements, and strategic parternships.

These all types of financing are interrelated with each other in many ways. Operation financing and long term financing can be done for a longer span of time like repaying the loan more than a year.

1. Operational financing is concerned with the financial aspects of running a company. It related to the operation activities that analyses the impact of company daily activities on balance sheet and reviews.

Operational financing is based on revenues and expense reports which includes budget and manufacturing performances. It is done to make business grow smoothly and efficiently.

2. Long term financing can be done through long term loans-

a. Providing working capital loans that represent funding for all purposes that are not fixed assets or line of credit.

b. Financing can be done for purchasing equipments.

c. Loans for refurbishment and property development.

D. Purchasing or improving land or buildings.

Operation financing and long term financing both are corelated with each other. Operation financing impacts the balance sheet, company growth, and have major influence on the cash flows as well as the net present value of the business. Long term financing impacts the business as well as the consumer.

Long term financing referes to business or personal loans that have longer time span for repaying the loan more than a year. Venture capitalist and angel investors invest on a long term horizon.