Explore BrainMass

External funding

Please provide three examples and applicable rationale with respect to how a firm might obtain external funding.

Solution Preview

The term capital structure is used to represent the proportionate relationship between debt and shares. The various means of financing represent the financial structure of an enterprise. Thus the composition of debt and shares represents the capital structure of the firm. One should measure the long term solvency of the organization for assessing the payment capacity of the organization. I will also use the Debt equity ratio which is Debt/Equity. This measures the long term solvency of the organization. Lower debt equity ratio indicates lower financial risk.

Let us discuss about h the sources of funds.

Equity represents ownership in the organization. There are various ways of raising money through equity shares:

1) IPO
IPO is initial public offer where the money is raised from the general public first time.
2) Follow on offers
Here the money is raised through the public ...

Solution Summary

Response describes the way of external funding