Page 275 - Microsoft Word - 00 ACCA F9 IWB prelims 2017.docx

Sources of finance

Long-term finance – equity

Equity shareholders (ordinary shareholders) are the owners of the
business and exercise ultimate control through their voting rights.

Equity finance is the investment in a company by the ordinary
shareholder, represented by the issued ordinary share capital plus
reserves.

Preference shares are not considered part of equity.

4.1 Raising equity

 Internally generated funds (retained earnings not already paid out as dividends
or used for prior investment. Quick and cheap source of finance if available)

 Rights issues (the issue of new shares to existing shareholders in proportion to
their existing shareholdings at a discount to the current market value)

 New external share issues (placings, offers for sale, etc.)

267