All businesses need to raise finance to run a business

Jun 27th, 2015
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Raising Money A business can raise money through either borrowing (called debt) or through owners’ investments (called equity.) Equity The sources of equity (owners’) funds are: 1. Internal Reserves: Profits earned may be kept aside and used for short term or long term investment needs. This is part of the existing equity of the company. 2. Fresh Equity: When investors buy shares of a company they increase the equity funds available to the company.

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Financial MarketsA QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COMRaising MoneyA business can raise money through either borrowing (called debt) or through owners investments (called equity.)EquityThe sources of equity (owners) funds are:1.Internal Reserves: Profits earned may be kept aside and used for short term or long term investmentneeds. This is part of the existing equity of the company.2.Fresh Equity: When investors buy shares of a company they increase the equity funds available to thecompany.Fresh Equity is raised using specific financial instruments, which can be bought and sold. Equity instruments are oftwo types:1.2.Common Shares: Common shares or stock represent ownership in a company. They carry voting rights forthe owners. They do not guarantee any return. They exist as long as the company exists.Key features are:Face Value/Par Value: It is set when the share is first issued. It is an internally set value given to theshare and has no relationship to the market price.Selling of Shares: A publicly traded companys shares are listed and traded on various stock exchanges.Claim of Common Shareholders: Common share

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