The Need for Capital and Sources of Finance

By the end of this lesson, students should be able to:

• State the main needs for funds
• Explain how businesses can meet the needs for funds
• Discuss the main sources of finance available to businesses
• Explain the differences between equity and debt capital
• Identify internal and external sources of finance
• Outline the criteria used by businesses when seeking finance
• Discuss the roles and functions of regional and international money and capital markets

The above information will then be used to answer the following major questions: 

1) If you were to open a company, which type of capital financing would you choose to use? In providing your answer, please show the similarities and differences, advantages and disadvantages between venture capital, working capital and investment capital.

2) How can firms improve their working capital?

3) Should a firm wish to finance the purchase of machinery and equipment, should it choose debt or equity financing? Explain your answer

4) Define the money market and explain its role in and economy. 

5) What is the role of the stock market in providing financing to firms?