What are the various instruments through which the firms procure finance? For each of these instruments discuss when and why they should be used to raise capital. Also explain non traditional sources of long term financing used by firms.
Capital investment and financing decisions are critical aspects of a firm's financial management, influencing its ability to undertake profitable projects and sustain operations. Firms employ various instruments to procure finance, each serving specific purposes based on timing, cost, risk, and other factors.
1. Equity Shares:
- When to Use: Equity shares represent ownership in the company and provide a claim on its assets and earnings. Firms typically issue equity shares during the initial public offering (IPO) or when seeking long-term capital for expansion.
- Why Use: Equity is a permanent source of capital, as shareholders do not demand repayment. It is suitable for financing projects with uncertain ____ _________ ________ ________ ______.
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