Question

In: Finance

State and explain two sources of business finance that may be used to launch a business.

State and explain two sources of business finance that may be used to launch a business.

Solutions

Expert Solution

Equity Financing: This is a source of financing business using the
owners’ finances. Thus, equity financing represents the business owners’
interest in the business and it gives him/her some residual claim on the
cash flows. It has infinite life in the business. However, equity financing
does not have any priority in liquidity. No interest is paid nor is security
required when investing the money into the business.

Debt Financing: This is a source of business financing using money
which is borrowed and which has an element of risk associated with it.
Debt financing has a contractual claim on the cash flows of an enterprise.
Thus, debt financing carries with it commitment to repay the principal
sum and the interest according to the agreed schedule.

Business financing may be obtained from two main sources; Equity financing
 and debt financing.

Evans KIptoo answered 3 years ago
Next > < Previous

Related Solutions

Briefly state and explain other sources of business finance.
Debt and equity financing are two main sources of business. Briefly state and explain other sources of business finance.
a. Mention any four sources of business startup ideas. (1 Mark) b. State and briefly explain...
a. Mention any four sources of business startup ideas. (1 Mark) b. State and briefly explain any four habits you would cultivate in developing entrepreneurial mindset. c. State and briefly explain the four types of innovation. d. State and briefly explain any two benefits and three drawbacks of owning your own business. e. State and briefly explain any two criteria you would consider in establishing your own business. f. Differentiate between a business opportunity and a business environment. (1 Mark)
Businesses may choose to finance their operations with external or internal sources. a. Briefly describe each...
Businesses may choose to finance their operations with external or internal sources. a. Briefly describe each of the main sources and give examples. b. What factors should be taken into account when determining the balance between short-term and long-term debt finance? c. How lenders can gain further protection for their loan?
Capital structure is a combination of capital from different sources used by companies to finance the...
Capital structure is a combination of capital from different sources used by companies to finance the operations and activities. Learners are required to refer at least to at FOUR articles journal for each assignment and answer the following questions: Discuss the determinants of companies’ capital structure choices. Discuss the relationship between companies ’corporate governance and capital structure. Discuss the impacts of financial crisis on the companies’ capital structures.
State two examples of business segments and explain why these would be a feasible business segment.
State two examples of business segments and explain why these would be a feasible business segment.
State and explain the tools of monetary policy that may be used by a government to reduce excess money in circulation.
State and explain the tools of monetary policy that may be used by a government to reduce excess money in circulation. 
What are the sources of Finance in Australia
What are the sources of Finance in Australia
Sources of finance in Panademic time
Explain and critically evaluate main sources of finance that could be utilized by a company during any panademic time like COVID-19
it lists the sources of long-term financing used by companies to finance investment capital, in order...
it lists the sources of long-term financing used by companies to finance investment capital, in order of lowest to highest cost, and explains what is the factor that causes one source of capital to be more or less expensive than other sources.
State two examples of business segments and explain why these would be feasible business segments. You...
State two examples of business segments and explain why these would be feasible business segments. You can use examples from your work or pick a publicly held company and describe the segments that company may have.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT