Have you heard the phrase Corporate Financing?

CORPORATE FINANCING.

Corporate Financing is the sourcing of funds for a business proposal or company’s investment.

There are two ways to source for fund ;
Debt and Equity.

What is Debt financing?
Debt financing is the sourcing of funds through loans from banks or issuing corporate bonds.
A company may borrow from commercial banks or other financial intermediary with interest payments.
A company may issue corporate bond in the capital market through investment banks with payments of interest over a period of time and return the principal at an agreed date.

What is Equity financing?
Equity financing is the selling of the company stock to investors. This is offering part of the company ownership for sale without repayment of principal or interest.
Corporate Financing is a balancing act involving decisions about the necessary amount of debt and equity.

while considering corporate Financing, the cost of capital is crucial you know why? because a business must generate returns greater than the cost of capital.

cost of capital is the minimum amount a business must generate on it’s capital to satisfy its shareholders, creditors and provider of capital. i.e if a business capital is #10,000 it returns should be higher I.e #11000, #12,000 or so.

also nite the debt to equity ratio should be In good standing depending on the industry standards.

Hope you learnt something today?