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Tag - Equity Capital

Understanding Cost of Capital – Finance

Equity Capital         When a company raises capital through the issue of ordinary shares it is effectively borrowing from the capital markets on a permanent basis. There is no maturity date associated with the shares and hence the loan is never repaid. Since the company is permanently in debt to the ordinary shareholders, the latter are the ultimate owners of the enterprise - a relationship recognized in law. The implication is that the enterprise’s business activities ought to be guided [...]

Sources of Investment Finance

When the management of a company addresses the issue of financing it investment decisions, it faces, in principle, a wide range of options. The personal wealth of the manager(s) is one potential source of investment funds. A bank loan is another. Another possibility is to sell shares in the company to outside investors. Or the company could sell loan stock (bonds). Profits arising from previous business activity are another possible source of finance. The matter is complicated by the [...]