The correct answer is C: Equity shares. Equity shares are a primary source of long-term finance because they represent ownership in a company and the capital raised through their issuance does not have a fixed repayment date. When a company issues equity, it raises funds from investors who become shareholders, essentially providing permanent capital that can be used for long-term investments, significant expansion projects, or funding ongoing operational needs without the pressure of principal repayment deadlines. This makes equity a cornerstone of a company's long-term financial stability and growth strategy.
A: Bank overdraft is incorrect. A bank overdraft is a short-term financing facility, typically used to cover temporary cash flow gaps. It allows a company to withdraw more money than it has in its account, but it is expected to be repaid quickly, making it unsuitable for long-term capital needs.
B: Trade credit is incorrect. Trade credit is extended by suppliers, allowing a company to pay for goods or services after they have been received, usually within a few weeks or months. It's a very short-term, spontaneous source of finance, primarily used for managing working capital rather than funding long-term assets.
D: Short-term loan is incorrect. As its name implies, a short-term loan has a repayment period of typically less than one year. These loans are designed to meet immediate liquidity needs or finance short-duration projects, not to fund substantial, long-term investments that require capital for many years.