Ideas in this flowchart

• Match the financing term to the period over which benefits are expected.
• The financing term should correspond to the benefit period of the associated outlay.
• Short-term items should be financed with short-term funds.
• Long-term items should be financed with long-term funds.
• Long-term financing sources include debt and equity.
• Debt financing involves borrowing.
• Equity financing represents ownership.
• Equity can come from selling new ownership interests.
• Equity can come from retaining earnings.
• Financial managers select a mix of long-term debt and equity.
• The selected mix should balance cost and risk.