Can You Describe Equity Financing And Its Merits And Demerits?

Equity Financing:
Equity means the ownership to the resources of the business. It is an important source of obtaining funds. The real owners of the business and share holders of the corporation provide funds to the business from their own sources.Following are the important sources of equity.

Funds provided by the owners.Additional contribution made by the owners.Earned profits reinvested by the business.Contribution by venture Capitalists;Issue of stocks to general investing public;Following are the merits and demerits of equity fund.Any business which is financed by the owners fund possesses a sound position.If fund is provided by the owners then they will work with full devotion. The business will flourish and rate of profit will be high.

Interest charges will not be paid by the business concerns on owner's fund.
The assets of the business will remain with the owners of business is liquidated.
During the course of business owners have no fear for the rate repayment of the capital. The owners use their fund for a long time.In case of equity financing a firm pays more income tax as compared to credit financing. There is no deduction of interest cost.Some times funds obtained from owner's funds remains unutilized which may cause more losses.In case of crises or slump a firm have sufficient to pay day to day expenditure which are essential to run the business.