1. Chapter 17 Financing a Business Methods of Obtaining Capital Selecting a Method of Obtaining Capital Sources of Outside Capital

2. Methods of Obtaining Capital Equity Capital – personal funds of the owners. Retained Earnings – profits earned by the business that the owners keep for use by the business. Debt Capital – capital that others lend to the business.

3. Equity Capital Sell personal assets Borrow from an individual (family) Mortgage Personal Property Forming a Partnership Forming a Corporation and selling stock Common Stock Preferred Stock

4. Retained Earnings Company Profits Stockholders Business DividendsRetained Earnings Replacement of buildings, equipment, addition of facilities, expansion, financial protection in bad times.

5. Debt Capital Borrowing money to pay expenses, replace their inventory, buy supplies, or purchase equipment. Short Term Capital – must be paid within a year (30, 60, 90 days) Obtain Funds from Bank (open line of credit, or a promissory note) Long Term Capital – capital borrowed for longer than a year. Lease Mortgage Long Term Notes

6. Selecting a Method of Obtaining Capital Cost of Obtaining Capital Interest Rates

7. Sources of Outside Capital Investment Banks – an organization that helps a business raise large sums of capital through the sales of stocks and bonds. Venture Capitalists – is an investor or investment group that lends large sums of money to promising new or expanding small companies.