With the European economic and monetary union and the introduction of the Euro, a further step in the globalisation of the markets was made. This means more and more growing stress of competition for nearly every company, because trade and entrance barriers have been elimi-nated. On the other side, this also offers more chances for growth and extending the business. Both aspects of course have one in common: capital requirements and especially staying liquid. In critical economic situations it is more than ever important to stay liquid (having enough pos-sibilities to cover the short-term possibilities). That?s the task of financing and planning the finances.
There are two main sources of assessing capital: equity financing and outside or credit capital. It should be a strategic and well calculated decision, what the capital structure of a company should look like. The ?leverage effect? plays an important role in this context. But it is often not easy to create this structure like it is wished. There are many factors which influence the ?price? and the efforts for getting liquidity out of certain capital sources. One big example therefore is the ?Basle 2? decision, which makes it more exertive for companies to gain loans of banks. This can also mean worse conditions of the loans. These circumstances make it inescapable to seek better alternatives ? like for example getting equity.
Not only because of tougher times for gaining credit capital, but also because of the continuous intensification of competition, has equity financing become more and more important. One cause for that is the long-term oriented affiliation of equity capital to the firm. There are nor-mally no ?stressing? dates when it has to be paid back like is the case with loans from a bank.
This elaboration will give a brief overview about the topic of equity financing. The most impor-tant and common possibilities will be presented and evaluated. But we will also have a look at some special forms and more or less unknown facts about this topic.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- General Aspects about Equity Financing
- External Financing
- Private Equity
- Venture Capital
- Going Public
- Further Possibilities and Variants
- Business Angels
- Trade Sales
- Tracking Stocks
- Industrial Obligations / convertible bonds
- Management Buy Out
- State Financing
- Internal Financing (Retained Earnings)
- Self-Financing
- Open Self-Financing
- Financing through Hidden Reserves
- Financing through accruals
- Financing from Depreciation and Amortization
- Factoring
- Self-Financing
- Valuation of the different Equity Financing Instruments
- External Financing
- Private Equity
- Venture Capital
- Going Public
- Further Possibilities and Variants
- Internal Financing
- Self-Financing
- Financing from Depreciation and Amortization
- Factoring
- External Financing
- Trends and Forecast about getting Equity
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This document provides an overview of equity financing and its importance in the context of globalization and increasing competition. It aims to present and evaluate the most common and important equity financing options, including some less known aspects.- The increasing importance of equity financing in today's business environment.
- Different forms of equity financing, both external and internal.
- The advantages and disadvantages of various equity financing options.
- Valuation of different equity financing instruments.
- Trends and forecasts regarding equity financing.
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction discusses the impact of globalization on competition and the increasing need for companies to stay liquid. It highlights the importance of equity financing as an alternative to credit capital, particularly in challenging economic times. The second chapter delves into general aspects of equity financing, emphasizing its long-term nature and the rights and power associated with equity capital providers. It also touches upon the importance of maintaining a healthy equity-to-debt ratio for a company's financial stability. The following chapter explores different external financing methods, starting with private equity and venture capital. It then delves into the process of going public and examines additional options like business angels, trade sales, tracking stocks, industrial obligations, management buyouts, and state financing. The fourth chapter focuses on internal financing methods, specifically retained earnings. It examines self-financing, including open self-financing, financing through hidden reserves, and financing through accruals. It also explores financing through depreciation and amortization and factoring as internal financing options. The fifth chapter delves into the valuation of different equity financing instruments. It examines external financing methods like private equity, venture capital, and going public, as well as internal financing options such as self-financing, depreciation and amortization, and factoring. Finally, the last chapter discusses trends and forecasts regarding equity financing, providing insights into the future of this important funding strategy.Schlüsselwörter (Keywords)
Equity financing, external financing, internal financing, private equity, venture capital, going public, business angels, trade sales, tracking stocks, industrial obligations, management buyouts, state financing, self-financing, retained earnings, depreciation, amortization, factoring, valuation, trends, forecast.- Quote paper
- Thomas Bossert (Author), 2003, Methods of Equity Financing - Methoden der Eigenkapitalfinanzierung, Munich, GRIN Verlag, https://www.grin.com/document/186508
