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

CBSE Class 11 CBSE Class 11 Business Studies
,
1

The sources of funds on the basis of 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, debentures.
  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.