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SOURCES OF

FINANCE
By: Mary Rose Evelyn Apellido-Montano
EQUITY
FINANCING
WHAT IS EQUITY FINANCING?

Is a method of raising capital by


selling company stocks to investors.
In return for the investment, the
shareholders receive ownership
interest in the company.
METHODS OF
EQUITY
FINANCING
PRIVATE PLACEMENT OF STOCK WITH
INVESTORS OR VENTURE CAPITAL
FIRMS
Simpler and more common in
young companies
Still involves compliance with
several laws
Does not require formal
registration with SEC
PRIVATE PLACEMENT OF STOCK WITH
INVESTORS OR VENTURE CAPITAL
FIRMS
Main Requirement: company
cannot advertise the offering and
must make the transaction directly
with the purchaser.
PUBLIC STOCK OFFERINGS

Entails a lengthy and expensive


registration process
Cost = more than 20% of the
amount of capital raised.
Better option for more mature
companies
PUBLIC STOCK OFFERINGS

Maintains control over small


businesses
Spreading ownership over a
diverse group of investors
HOW DOES IT WORK?

Need for additional capital


Equity or Debt?
Sell stock in exchange for cash
Proportion sold depends on how
much the owner has invested and
the worth of investment at the time
of financing.
EXAMPLE

An Entrepreneur invested Php


600,000.00 (own all shares)
As the company grows and
requires further capital,the need
for an investor will arise.
“Angel Investor”or “Venture
Capitalist”
cont. EXAMPLE

 If the investor is willing to pay Php


400,000.00 with a share price of Php
1.00 (i.e. the original investment is
still worth 600K), then total capital
will be raised to 1M.
 Entrepreneur (60%) ; Investor (40%)
WHY IT MATTERS?

FOR ENTREPRENEURS
Equity financing is an important
method to raise capital for the
company before it is profitable in
exchange for diluted ownership and
control of the company.
WHY IT MATTERS?
FOR INVESTORS
Equity financing is an important
method of acquiring ownership
interests in companies. Investors are
always wary that subsequent rounds
of equity financing usually require
them to dilute some portion of their
ownership as well.
DIFFERENCE
BETWEEN DEBT
AND EQUITY
FINANCING
ADVANTAGES AND
DISADVANTAGES
OF EQUITY
FINANCING
REFERENCES
 WWW.INVESTINGANSWERS.COM
 HTTPS://EN.WIKIPEDIA.ORG
 WWW.SLIDESHARE.NET
 WWW.CSCCAPITAL-LTD.COM
 WWW.ACCOUNTINGCOACH.COM
 WWW.KEYDIFFERENCES.COM
 WWW.THEFINANCEBASE.COM
 WWW.THEHARTFORD.COM
 WWW.EFINANCEMANAGEMENT.COM
THANK
YOU!!!


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