Equity Financing - Definition - Examples - Source of Equity Financing

7/5/23, 4:26 PM Equity Financing - Definition - Examples - Source of Equity financing
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Table of Contents Insurance in it
0.1. Equity Financing Definition: by Sagar Shah

0.2. What is Equity Finance?
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0.3. Example of Equity Financing:
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Equity financing is the strategy for raising capital by offering companies
stocks / shares to investors, public, money lenders, institutions etc. Capital
Generally those who receive the shares or stocks are known as by Jessica Patil
shareholders of the companies.

The Pros and Cons of
Different Types of Credit

For instance: A startup might require different rounds of equity financing
to address liquidity issues. They may jump at the chance to go for Cards in India
convertible preference share as type of equity finance, and as the firm by Deepika Sharma
reports growth year on year, it might think to go public. Once organization

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chooses to go public, financial investors (like: Venture Capitalists) can
Beginner? Is ETF Investing
utilize the chance to sell their stake to retail investors, institutional at a
premium rate. If organization requires additionally huge money, it can go for Safe?
public offer as well. by Sagar Shah
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At the point when an organization goes for equity financing to meet its
Leverage in Your
liquidity needs, for enhancement or extension reason, it needs to set up a
plan where money related details of the organization are specified clearly. Investment Company
Equity financing is somewhat different than debt financing, but final goal by Kiran Mehta
of raising liquidity are relative same for both equity and debt financing.
What is Equity Finance?

In terms of bookkeeping, equity is the difference between the value of
assets and liabilities owned by the business. Equity finance formula is as
followed:
Equity (Owner’s Equity) = Assets – Liabilities.
Let us take the equity finance example to understand.
If somebody owns a car worth INR 15,000, but owes INR 5,000 loan against
mortgaging car, then the car’s is of INR 10,000 value of equity. Equity can - Check Out Popular Stocks
be negative if liabilities exceed assets. Under liquidation procedures of any -
company, the equity is what stays after all the liabilities have been paid up.
Reliance Inds HDF

Example of Equity Financing:
C
Let us take an equity financing examples to get more cleared. End goal of
Adani Green TCS
any company is growth. An organization will require an extra capital, which
Energy
it might attempt to acquire in one of two ways i.e. either debt or equity.
Equity finance includes the offer of the organization’s stock and giving a part Alok Inds ITC
of the responsibility for organization to financial institutions or investors in
return for extra capital. The extent of the organization that will be sold in an
equity financing relies upon how much the proprietor of the company has
invested and what that investment is worth to finance. For example, a Categories
business person who invests INR 500,000 in the startup of an organization Select Category
will own all the shares of the organization.
With the growth of the company, it requires additional capital for investment;
the business person may look for alternative sources like: a venture
capitalist, angel investor, etc. For example financial investor will pay INR
400,000 and agrees to an offer share price of INR 1.00 (i.e. that the first
INR 600,000 contributed is as yet worth INR 600,000), at that point the
aggregate capital in the organization will be raised to INR 10,00,000. The
business owner will at that point control 60% of the shares of the
organization and sold 40% of the shares of the organization through an

equity finance to the investors.
Importance of Equity Financing:

In the beginning stage of an organization’s growth, especially when the
organization does not have adequate incomes, income or assets as
collateral for debt finance. Equity financing can draw in capital from
beginning stage investors who are willing to take risk to start a business.
Correspondingly, when an organization is built up and has resources and

income or has the guarantee of touchy development because of new
advancements or new markets, it can raise generous capital through an
equity financing, for example, a public offering in the capital markets. In light
of the organization’s stock value, a part of the organization is sold to the
new investors or financial institutions. For the business person, financing
from equity is a technique to raise capital for the organization before it is
gainful in return for diluted control and ownership of the organization.
Conclusion:
Equity financing are one of the best sources of finance preferred by many
investors. Here we have understood equity finance definition along with
equity finance examples. You can learn more about equity finance in further
chapters. Hope you will find interesting.
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Basics of Debt Financing and Equity Financing for
Beginners
Chapter 1: What is Debt Financing with Examples?
Chapter 2: Types of Debt Financing
Chapter 3: Sources of Debt Financing
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7/5/23, 4:26 PM Equity Financing - Definition - Examples - Source of Equity financing

What is Equity Financing? Definition with

Approved for a Home Loan

Top 5 Tips – Get an Instant

Personal Loan with a Low

Top 10 – Crypto Trading

Mistakes to Avoid for

Creating a Financial Plan?

 5(11) Don’t Forget Home

Table of Contents Insurance in it

0.1. Equity Financing Definition: by Sagar Shah

Equity Financing Definition: How to Unlock Your

Trading Potential with Po

shareholders of the companies.

Different Types of Credit

reports growth year on year, it might think to go public. Once organization

public offer as well. by Sagar Shah

Top 10 – Best Tools to

What is Equity Finance?

Equity (Owner’s Equity) = Assets – Liabilities.

Let us take the equity finance example to understand.

Reliance Inds HDF

organization and sold 40% of the shares of the organization through an

Importance of Equity Financing:

Correspondingly, when an organization is built up and has resources and

Read E-Learning Tutorial Courses - 100% Free for All

Chapter 2: Types of Debt Financing

Chapter 3: Sources of Debt Financing

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