Sources of finance
You'll learn how companies raise capital by exploring the main sources of finance: equity, debt, and hybrid options. This video breaks down the characteristics, costs, and flexibility of each, then walks you through a practical example of choosing the right finance source based on gearing ratios and business
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In this lesson
- 0:00 Equity and debt explained
- 0:40 Why equity is expensive and flexible
- 1:10 Debt advantages and obligations
- 2:21 Alternative financing methods
- 3:14 Venture capital and business angels
- 4:12 Asset securitisation overview
- 4:35 Prescott case study setup
- 5:11 Choosing finance by gearing level
- 5:38 Trade-off theory and cash flow risk
- 6:17 Lease finance for specialist assets
About this lesson
circumstances. Understanding these options is essential for FM, AFM, and strategic papers, where you'll need to evaluate financing decisions and their impact on company value and risk. The session covers equity as ownership stake with flexible but expensive dividends, and debt as cheaper borrowing with tax advantages but fixed obligations. You'll also explore hybrid sources like convertible bonds, leasing, venture capital, and private equity, each suited to different business situations. The worked example shows how gearing levels, pecking order theory, and trade-off theory guide real financing choices, giving you the framework to answer exam questions confidently and apply these concepts to business scenarios.
Duration: 7m
Transcript
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