Public deposit is good source for long term financing.

Ans. False

Reasons: (1) Public deposits are an important source of financing short term requirement of company. Companies generally receive public deposits for the period ranging from 6 months to 36 months.

(2) Under this method, general public is invited to deposit their saving with the company for varied period. Interest is paid by companies on such deposits. The rates of interest are higher than those allowed by commercial banks. The company issues 'Deposit Receipt' to the depositor.

(3) Public deposit is paid interest for the duration either on cumulative or non - cumulative basis.

(4) It is refunded to the deposit holder on maturity. For long term borrowing capital company avails of debenture capital and loan from banks and financial institutions.

(5) For long term ownership capital company uses equity share capital.