Equity Financing
|
|
From Wikipedia, the
free encyclopedia In accounting and finance, equity is the residual
claim or interest of the most junior class of investors in an assets, after
all liabilities are paid. If valuations placed on assets do not exceed
liabilities, negative equity exists. In an accounting context, Shareholders'
equity (or stockholders' equity, shareholders' funds, shareholders' capital
or similar terms) represents the remaining interest in assets of a company,
spread among individual shareholders of common or preferred stock.
|
At the start of a business, owners put some funding into the business to
finance assets. This creates liability on the business in the shape of
capital as business is a separate entity from its owners. Businesses can be
considered to be, for accounting purposes, sums of liabilities and assets;
this is the accounting equation. After liabilities have been accounted for,
the positive remainder is deemed the owner's interest in the business.
This definition is helpful to understand the liquidation process in case of
bankruptcy.At first, all the secured creditors are paid against proceeds
from assets. Afterwards, a series of creditors, ranked in priority sequence,
have the next claim/right on the residual proceeds. Ownership equity is the
last or residual claim against assets, paid only after all other creditors
are paid[1]. In such cases where even creditors could not get enough money
to pay their bills, and nothing is left over to reimburse owners' equity.
Thus owners' equity is reduced to zero. Ownership equity is also known as
risk capital, liable capital and equity.
Equity investments
Equity investments generally refers to the buying and holding of shares of
stock on a stock market by individuals and firms in anticipation of income
from dividends and capital gain as the value of the stock rises. It also
sometimes refers to the acquisition of equity (ownership) participation in a
private (unlisted) company or a startup (a company being created or newly
created). When the investment is in infant companies, it is referred to as
venture capital investing and is generally understood to be higher risk than
investment in listed going-concern situations.
The equities held by private individuals are often held via mutual funds or
other forms of pooled investment vehicle, many of which have quoted prices
that are listed in financial newspapers or magazines; the mutual funds are
typically managed by prominent fund management firms (e.g. Schroders,
Fidelity Investments or the Vanguard Group). Such holdings allow individual
investors to obtain the diversification of the fund(s) and to obtain the
skill of the professional fund managers in charge of the fund(s). An
alternative, usually employed by large private investors and pension funds,
is to hold shares directly; in the institutional environment many clients
who own portfolios have what are called segregated funds as opposed to, or
in addition to, the pooled e.g. mutual fund alternative.
|
More related links about
Equity Financing
|
|
|
-
Equity Financing
- Definition of Equity
Financing on Investopedia - The act of raising money for company
activities by selling common or preferred stock to ...
www.investopedia.com ›
Dictionary -
-
Definition of term
equity financing
and how equity
financing applies to small business owners.
sbinfocanada.about.com/cs/financing/g/equityfinance.htm
-
-
equity financing
- definition of equity
financing - Financing by selling common stock or preferred stock to
investors.
www.investorwords.com/1728/equity_financing.html
-
-
Each these sources of
equity finance
are covered in separate tutor2u revision notes. Business studies Blog -
accounting & finance resource ...
tutor2u.net/.../finance/finance_sources_equity_introduction.asp
-
-
Venture capital is one of the more popular
forms of equity
financing used to finance high-risk, high-return businesses. The
amount of equity a venture ...
www.entrepreneur.com ›
... ›
Category ›
Expansion Financing
-
-
The acquisition of funds by issuing shares
of common or preferred stock. Firms usually use
equity financing
when they are unable to raise sufficient funds ...
financial-dictionary.thefreedictionary.com/equity+financing
|
|
| |
|
