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Making a Choice

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MAKING A CHOICE RESEARCH ASSIGNMENT

Use the Internet as a resource to help you find answers to the questions on this worksheet. You may write your answers in the space provided below using YOUR OWN WORDS.

1. What is the meaning of the following terms (provide an example for each in your explanation):

A) Equity Capital • A portion of the capital supplied by the sale of stock • Used to invest in the business • May be bought by institutional or private investors • E.g. Coke sells stocks on the TSX to investors. The money gained (Equity Capital) is then used to invest in business operations.
B) Debt Financing • Businesses that raise money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors • In return for lending money, temporary investors become creditors and receive a promise to repay principal and interest on the debt
C) Business ‘Angel’ a person who invests privately in a start-up company (especially in exchange for equity in the company)

EQUITY CAPITAL

2. Provide advantages and disadvantages for the following types of equity capital:

PERSONAL CAPITAL FROM FAMILY
|Advantages |Disadvantages |
|Negotiations can be made more easily |Can put your own family in financial difficulty |
|Probably will invest more into the business than an outside investor |May cause family relations of weaken |
|Can decide when to invest and withdraw money from business depending on the |Trust by other family members may fail |

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