Long-term liabilities provide stability to the capital structure of a business, the most important among them being equity, which is considered as the ultimate risk capital to absorb shocks. This chapter examines the origin, nature, and details of long-term liabilities in order to have a proper understanding of every item of liability a business may contract. It covers important concepts such as equity or share capital, authorised capital, issued and paid-up capital, non-voting equity share capital, reduction of capital, limited liability, preference share capital, share premium, free reserves, bonus shares, capital reserve, debentures, term loans, loans from friends and relatives, loans from subsidiaries, and modern financial instruments.
Keywords: liabilities, equity, authorized capital, issued capital, paid-up capital, limited liability, redeemables, share premium, dividends, free reserves, bonus shares, capital reserve, debentures, loans
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