The company can raise owner's fund by issue of this source of finance. Name the source of finance explain it. Also discuss any two advantages two disadvantages of this source.
Issue of equity shares is one of the two major sources of owner's fund.. Equity shares represent the ownership of
a company and thus the capital raised by issue of such shares is known as ownership capital or owner’s funds. Equity shareholders do not get a fixed dividend but are paid on the basis of earnings by the company Their liability, however, is limited to the extent of capital contributed by them in the company.
Advantages:
1. No burden on company to pay dividend.
2.Funds can be raised without creating charge on asset.
Disadvantages :
1.Cost is more.
2. Additional equity shares dilutes voting rights.
a company and thus the capital raised by issue of such shares is known as ownership capital or owner’s funds. Equity shareholders do not get a fixed dividend but are paid on the basis of earnings by the company Their liability, however, is limited to the extent of capital contributed by them in the company.
Advantages:
1. No burden on company to pay dividend.
2.Funds can be raised without creating charge on asset.
Disadvantages :
1.Cost is more.
2. Additional equity shares dilutes voting rights.