What Is Financing?
Providing funds for investments, purchases, or business endeavours is the process of financing. Financial organisations like banks are in the business of lending money to individuals, businesses, and investors so they can fulfil their goals. Any economic system that makes use of financing is essential because it enables businesses to buy goods that are out of their immediate price range.
Types of Finance
Personal finance
Corporate finance
Public (government) finance
Key Takeaways
Making investments, purchases, or other financial transactions is the process of financing.
Financing includes two types: equity financing and debt financing.
The fact that there is no requirement to repay the money obtained through equity financing is its main benefit.
The negative of equity financing is extremely significant, but it does not add to the company's financial burden.
Debt financing typically has lower costs and offers tax benefits. Large debt loads, however, might result in default and credit risk.
A thorough view of a company's total cost of financing is provided by the weighted average cost of capital (WACC).
Key Takeaways
Making investments, purchases, or other financial transactions is the process of financing.
Financing includes two types: equity financing and debt financing.
The fact that there is no requirement to repay the money obtained through equity financing is its main benefit.
The negative of equity financing is extremely significant, but it does not add to the company's financial burden.
Debt financing typically has lower costs and offers tax benefits. Large debt loads, however, might result in default and credit risk.
A thorough view of a company's total cost of financing is provided by the weighted average cost of capital (WACC).