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unit-5-methods-of-raising-finance

Unit-5 Methods Of Raising Finance

In this unit you will learn why finance is needed, what the sources of finance and the methods of raising finance.

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What is meant by ownership capital? What are its merits and limitations?

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Learning Pundits Content Team

Written on Jun 24, 2019 4:14:24 PM

The amount of capital invested in a business by its owners is known as Ownership Capital.

Merits:

  1. Investors who contribute towards the share capital of a company become its owners by virtue of their share holding. They are entitled to receive dividend out of the profits earned by the company.
  2. Ownership capital may be used for financing fixed assets as well as continuous investment in current assets.

Demerits:

  1. The owners cannot claim to get any return on their investment unless there is profit.
  2. The risk of losses and of low rates of return are, thus, associated with ownership capital.