source of equity
Source of capital:
Capital is the basic needs of organisation; it is needed in every step of business, from buying raw materials to selling their goods. To maintain this capital, business needs to identify and allocate their proper source of finance. The place where the business gets their funds from is called their source of capital. The business have two different source of finance, internal source (for ex: retained profits, sales of existing assets, cut down stock level, etc) and external sources that can be furthermore divided into three different form, either short term (for ex: bank overdraft, creditors, debt factoring etc), medium term (leasing, hire purchase, medium term loan, etc) or long term (shares, debentures, long term loan, etc).
So the business can raise finance in number of ways. It also depends on the nature of business, if it is a big organisation than they have large variety of financial source. They have large number of shareholders, from where they can collect large amount of finance to set up and expand their business. Also they can borrow loan or use overdraft service from bank or financial institution to maintain their finance. Business may also be qualified for grants, if they meet certain condition of government. In the business activities, if you need the expensive equipment than its better to leased than purchase. Otherwise you can also do hire purchased. You have to put deposit on item and paid the reminder on instalment, when you paid the last instalment than you own the item. It saves your finance to expend in other activities. Credit trades or creditors are another option of short term finance. A company can borrow the goods from supplier and pay them later in given period of time.
Also we can categorise the source of finance in following ways:
a) Equity
b) Debt
c) Hybrid theory
Equity:
Equity is the main source of finance that belongs to the owners or stockholders. It is ownership interest of shareholders in company.
Capital is the basic needs of organisation; it is needed in every step of business, from buying raw materials to selling their goods. To maintain this capital, business needs to identify and allocate their proper source of finance. The place where the business gets their funds from is called their source of capital. The business have two different source of finance, internal source (for ex: retained profits, sales of existing assets, cut down stock level, etc) and external sources that can be furthermore divided into three different form, either short term (for ex: bank overdraft, creditors, debt factoring etc), medium term (leasing, hire purchase, medium term loan, etc) or long term (shares, debentures, long term loan, etc).
So the business can raise finance in number of ways. It also depends on the nature of business, if it is a big organisation than they have large variety of financial source. They have large number of shareholders, from where they can collect large amount of finance to set up and expand their business. Also they can borrow loan or use overdraft service from bank or financial institution to maintain their finance. Business may also be qualified for grants, if they meet certain condition of government. In the business activities, if you need the expensive equipment than its better to leased than purchase. Otherwise you can also do hire purchased. You have to put deposit on item and paid the reminder on instalment, when you paid the last instalment than you own the item. It saves your finance to expend in other activities. Credit trades or creditors are another option of short term finance. A company can borrow the goods from supplier and pay them later in given period of time.
Also we can categorise the source of finance in following ways:
a) Equity
b) Debt
c) Hybrid theory
Equity:
Equity is the main source of finance that belongs to the owners or stockholders. It is ownership interest of shareholders in company.