"productive capital" necessary for operations, signaling capital which signals a company's financial strength to shareholders, and regulatory capital which fulfills capital requirements. Sources of capital Long term – usually above 7 years Share Capital Mortgage loan Retained Profit Venture capital Debenture Project finance Medium term – usually between 2 and 7 years Term Loans Revenue-based financing Leasing Hire Purchase Short term – usually under 2 years Bank Overdraft Trade credit Deferred Expenses Factoring Capital market Long-term funds are bought and sold: Shares Debenture Long-term loans, often with a mortgage bond as security Reserve funds Euro Bonds Money market Financial institutions can use short-term savings to lend out in the form of short-term loans: Commercial paper Credit on open account Bank overdraft Short-term loans Bills of exchange Factoring of debtors Differences between shares and debentures Shareholders are effectively owners; debenture-holders are creditors. Shareholders may vote at AGMs (Annual General Meetings, alternatively Annual Shareholder Meetings) and be elected as directors; debenture-holders may not vote at AGMs or be elected as directors. Shareholders receive profit in the form of dividends; debenture-holders receive a fixed rate of interest. If there is no profit, the shareholder does not receive a dividend; interest is paid to debenture-holders regardless of whether or not a profit has been made. In case of dissolution the firm's debenture holders are paid first, before shareholders. Types of capital Fixed capital Fixed capital is money firms use to purchase assets that will remain permanently in the business and help it make a profit. Factors determining fixed capital requirements: Nature of business Size of business Stage of development Capital invested by the owners location of that area Working capital Firms use working capital to run their business. For example, money that they use to buy stock, pay expenses and finance credit. Factors determining working capital requirements: Size of business Stage of development Time of production Rate of stock turnover ratio Buying and selling terms Seasonal consumption Seasonal product profit level growth and expansion production cycle general nature of business business cycle business policies Debt ratio Own and borrowed capital Capital contributed by the owner or entrepreneur of a business, and obtained, for example, by means of savings or inheritance, is known as own capital or equity, whereas that which is granted by another person or institution is called borrowed capital, and this must usually be paid back with interest. The ratio between debt