Question

Like many small businesses in the early stages, founder jim moon self-financed moonworks. when the founder provides the primary funding for a small business, she or he is employing which form of financing?

Answer 1

Appropriate financing used in small or medium businesses is using equity financing.

What is equity financing? Let's look at the explanation below!

Further explanation

Equity financing is where you exchange ownership of your business with private investors (angel investors) or venture capitalists - in return for their capital.

This equity is especially important for certain industries and types of businesses, such as technology companies and companies with global aspirations.

As an accounting term, equity can be interpreted as the difference in value between the value of assets and liabilities. In other words, equity is the residual rights held over the assets of the company after deducting liabilities.

Types of Equity

• Home equity
• Shareholder equity
• Owner's equity
• Equity financing

PRO EQUITY FINANCING

• You do not need to pay interest on the capital you get, so there is no need to place your business profits in debt / loan repayments. This means you have more money to grow your business.
• With the right investor, you can get great experience, wisdom, industry relations and more. This relationship can last for a very long time.
• If your business fails, you are not required to pay back the investment.

CONTRA FINANCING OF EQUITY

• It takes a long time especially when compared to some of the fastest loan financing options outside.
• You give ownership of your business, and with that, the power of decision making. You should consult with investors, and you might not agree with the direction of your company. You might even be forced to cash out your share and leave your business alone.

Learn More

equity financing brainly.com/question/7177629

accounting terms brainly.com/question/7177629

Details

Class: College

Subject: Business

Keywords: Equity, Accounting, Financing

Answer 2

When the founder provides the primary funding for a small business, he/she is using equity financing. In equity financing, part of the ownership of a business is exchanged for financial investment. One can look into his/her own personal savings or equity to employ equity financing.