#commerce/y9/business
- Equity is cash received from the sale of shares ownership, ie. inviting more owners into the business.
- The key difference between debt finance and equity finance is that the investor becomes a part-owner of your business and shares any profit the business makes.
- Most shareholders do not expect immediate return.
- Profit has to be shared with the shareholders in the form of dividend. If there is a loss, the loss is not shared with the shareholders.
- If the company is listed on the stock exchange, shareholders will also gain by the increase of the share price.
| Advantages of Equity Financing | Disadvantages of Equity Financing |
|---|
| Less risky to business owners | Investors expect a high return |
| If there is no profit, dividend is not distributed | Loss of control due to multiple investors |
| There is no cash outflow (unless withdraw from Investment) | Conflict can arise if partners do not agree |