What does equity financing include?

Equity financing involves raising capital through the sale of ownership in the firm. This means that a company provides shares or ownership stakes to investors in exchange for funding. By doing this, the business allows investors to become partial owners and, therefore, participate in the company's growth and profits. This form of financing does not involve repayment obligations like loans or bonds, making it a strategic choice for businesses looking to expand without incurring debt.

In contrast, trade credit, issuing bonds, and borrowing from banks relate to debt financing. These methods require repayment and often come with interest payments, which can impact cash flow. Understanding the distinction between equity financing and these other forms of funding is crucial for effective financial management and strategic planning in a business context.