Page 435 - Business Principles and Management
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Unit 5
FIGURE 16-1Sources of Capital to Start a New Business
Percentage of Businesses
79%
80
70
60
50%
50
40
25% PerSa = Personal Savings
30
Banks = Banks
Fr/Re = Friends and Relatives
20 Inv. = Investors
10% 8% Supp. = Suppliers
Oth. = Other
10 6%
0
PerSa Banks Fr/Re Inv. Supp. Oth. Sources
FIGURE 16-2 A balance sheet demonstrates the financial strength
of a business.
McGraw’s Pet Shop
Balance Sheet
July 31, 20--
Liabilities:
Assets $400,000
Creditor Capital
Debt Capital
Obtained from Bank $160,000
Capital:
Proprietary Capital
Equity Capital Invested
by Owner $240,000
Total Assets $400,000
Total $400,000
trouble getting debt capital. McGraw’s Pet Shop, as shown in Figure 16-2, might
be able to get an additional loan from the bank because its liabilities, or debt, are
much less than its equity capital. However, if its liabilities were $240,000 and its
equity capital were $160,000, the Pet Shop probably would not get the loan.
CHECKPOINT
What are three methods of obtaining capital for a business?
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