1.1.

3 Equities

Shares are bits of equity. When companies start up they need cash for an office
and employees. Perhaps the entrepreneur and sole owner behind the business puts in his lifetime
savings of ₤50,000. That money represents is equity stock. But it is not enough to cover his costs
so he goes to the bank. Which lends him another ₤50,000? he still owns 100% of his business but
it is now financed 50% through equity(his savings) and 50% through debt(bank loan). Later, he
needs more money to finance growth-a second employee perhaps. He can either ask the bank for
more money or ask someone else to put some more “equity” into the business. In the case of
larger companies they commonly decide to float the company on the stock exchange, giving the
general public and institutional investors the opportunity to put more equity into the business by
buying shares.