The requirement here was to discuss the sources and characteristics of long-term debt finance available to the company in the question. Many candidates struggled to gain good marks.

One reason that some candidates struggled to gain marks was because they did not read the requirement carefully. Since a discussion of long-term debt finance was needed, no credit was given to discussions of short- term debt finance (e.g. overdrafts) or equity finance (such as ordinary shares and preference shares).

The suggested answer looks at long-term bank loans, bonds or loan notes, convertible bonds and loan notes, and deep discount bonds and zero coupon bonds. Credit was given to answers that discussed finance leasing and sale and leaseback. Credit was also given to answers that discussed the characteristics of long-term debt finance from a general perspective, rather than using the sources of debt finance perspective of the suggested answer.