Equity financing

Dividends consist of compensation, usually cash, which a company pays its shareholders. Dividends represent the returns shareholders get for the risk they take by investing in a company. Usually, the higher these risks are, the more returns they will receive in exchange. Companies pay dividends after regular intervals, such as annually, semi-annually, quarterly, or even […]

Companies generate finance through many different sources. The main source of finance for them is equity. Equity consists of the equity instruments of a company, usually ordinary shares, issued to shareholders. A company issues these shares to its shareholders in exchange for compensation. Once shareholders buy shares, they can exchange them on the stock market.

Regarding the amount of capital a company has, two main accounts show the total amount, paid-in capital and additional paid-in capital. While both represent a company’s total capital obtained from its shareholders, they are still different. To understand the difference, however, it is vital to understand each of these accounts. What is Paid-in Capital? Understanding

The main source of finance for a company is the equity investment it receives from its shareholders. The shareholders receive shares of the company in exchange for the shares of the company. The price of the share is usually the price that market participants are willing to pay for it. Therefore, the price usually depends

A company has no legal obligation to return Shareholders’ initial paid-in or contributed capital. Contributed capital comprising paid-in capital and share premium is utilized to fund business operations. When a business performs well and generates profits its equity rises. However, several factors cause the Shareholders’ equity to go in the negative column. As the total

Shareholders’ total equity represents two major components as retained earnings and Paid-In Capital. Other Equity contributors are Treasury stocks and other Reserves. For a sole proprietorship business or a limited partnership for a small business, both represent the same components. The fact that a sole proprietor or a small partnership comes with unlimited business liability

A company can raise funds through equity and debt financing. Shareholders’ equity is denominated by share capital and share premium. The common stock or share capital represents the resources invested by shareholders. Over time, the total valuation or market capitalization of stock changes through share price adjustments. Share premium or Additional Paid-In capital only represents

The Paid-In capital or the Contribution capital represents the shareholders’ investment in a company through cash or assets. It forms a significant portion of the Shareholders’ total equity along with Retained Earnings. It comprises two parts of the Paid-In capital at Par value plus the Additional Paid-In capital above the par value of the share.

Companies can raise funds mainly through two forms, debt, and equity. Equity financing is a company’s prime liability towards its shareholders. Companies often issue additional shares with initial public offerings or rights issues to raise funds. Additional Paid-in capital or Share Premium refers to the money shareholders pay above the face value of the company

We know that a company’s management has three key decisions to make for a company to effectively achieve the strategic goals. These key decisions are Investment, Dividend, and Financing Decisions. These decisions are linked and affect directly each other. A well planned and a positive NPV cash flow project can yield high profits for the