Business Finance

Step 1: Understanding sources of finance.
Finance for a company can be raised through various methods such as debentures, equity share capital, preference shares, or retained earnings. Among these, retained earnings are the cheapest source because they do not involve any external costs or interest payments.
Step 2: Analyzing the options.
(A) Debenture: Incorrect. Debentures involve interest payments, making them a costlier source of finance compared to retained earnings.
(B) Equity share capital: Incorrect. Equity shares may involve costs related to issuing shares and dividend payments.
(C) Preference share: Incorrect. Preference shares also require dividends, making them more expensive than retained earnings.
(D) Retained earning: Correct. Retained earnings are internal funds that do not involve interest or dividend payments, making them the cheapest source of finance.
Step 3: Conclusion.
The correct answer is (D) Retained earning, as it is the most cost-effective source of finance for companies.

Step 1: Understanding long-term finance.
Long-term finance refers to funds raised for a period longer than one year, primarily used for purchasing fixed assets or for financing long-term investments. It includes sources such as equity shares, preference shares, and long-term loans. Dividends, however, are payments made to shareholders as a portion of the company's profits and are not considered part of long-term finance.
Step 2: Analyzing the options.
(A) Equity shares: This is incorrect. Equity shares represent ownership in a company and are a form of long-term finance.
(B) Dividend: Correct. Dividends are not considered a part of long-term finance; they are payments made from profits.
(C) Preference share: This is incorrect. Preference shares represent a source of long-term finance and are issued to raise funds.
(D) Long-term loan: This is incorrect. A long-term loan is a key form of long-term finance.
Step 3: Conclusion.
Dividend is not included in long-term finance, making the correct answer (B) Dividend.