corporate-finance-assignment-part-b.docx

Equity financing is a little different from debt

Info icon This preview shows pages 1–3. Sign up to view the full content.

using the capital of the funds raised. Equity financing is a little different from debt financing. Debt financing an organization borrow from others to meet liquidity requirement and to sustain the business. It is ideally for an organization to raise fund through both equity financing and debt financing to meet the liquidity needs or any operation plan (“Definition of ‘Equity Finance’”, n.d.).
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Equity Financing bring advantages to an organization. One of the advantages is permanent source of finance. It could be a lasting way to gain financial support of the organization. For example, a firm would like to produce products with high-quality or provide high-quality service to their customers. With the financial support, the firm could have the leverage to focus on fulfilling this type of objectives and not only concern about the financial management. It is a solution for organization that always looking for getting funds. Other than permanent source of finance, equity financing provides advantage of retained earnings. Organization’s internal financial sources could be created by equity financing. The organization could generate earnings in the way of using capital, and the earnings could be retained to finance the enlarged working capital and other fund requirements. It eliminates the other limitation of raising funds through other sources. The shareholders’ wealth is maximized as an objective of an organization while the fund are being used in the project of the organization generate higher returns as compared to the existing payback for equity shareholders. Another advantage of the equity financing is obligatory dividend payments. It is a major advantage of the new company. New started company are mostly with the limitation of uncertainty cash flows. Equity financing provides this kind of firm no fixed responsibility to pay dividends, company could choose to pay zero dividends or a small amount of dividends. The
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.
  • Summer '17
  • ms lau
  • Finance, Equity Financing

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern