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Equity financing is when a company sells part of its ownership to investors in exchange for cash. Learn about the common types of equity financing, such as angel investors, venture capital, IPOs and crowdfunding, and how they differ from debt financing.
Learn what equity means in different contexts, such as investing, corporate finance, real estate, and personal finance. Find out how to calculate and compare equity value, and see examples of common equity types.
Learn how to calculate the debt to equity ratio (D/E), a measure of leverage and financial risk, and compare it across industries. Find out what a low, high, or negative D/E ratio means and why it matters for investors and lenders.
WACC is the average rate that companies pay to finance their operations, incorporating equity and debt. More debt increases WACC, which may lower the company's valuation and returns for investors. Learn how to calculate WACC and use it to evaluate investments.
Private equity is money for investments made directly in private companies or in public companies that become private. Learn how private equity firms raise, manage and exit their funds, and why private equity matters for the economy.
Learn what capitalization means in business accounting and how it affects the value and profit of a company. Find out the difference between market capitalization and equity value, and the advantages and disadvantages of capitalizing costs.
The equity multiplier is a ratio that measures how much debt a company uses to finance its assets. It is calculated by dividing total assets by total stockholders' equity. Learn how to use the equity multiplier and see an example.
In this case, the company has used equity financing. With a bond, the investor does not receive equity in the company. The company borrows from the investor, and the investor receives the interest payments and principal of a bond, regardless of how high or low the company’s stock price becomes. In this case, the company has used debt financing.
Debt financing is the use of borrowing to pay for things, such as acquisitions, investments or growth. It can increase shareholder value, but also involves risk and cost. Learn how debt financing works, why it matters and how to invest in companies with debt.
Say Company ABC generated $10 million in net income last year. If Company ABC’s average total equity equaled $20 million last year, we can calculate Company ABC’s ROE as: This means that Company ABC generated $0.50 of profit for every $1 of total equity last year, giving the company an ROE of 50%. Return on Equity vs. Sustainable Growth Rate