Sources of Funds for International Operations
Firms obtain funds for their activities from three primary sources: equity financing, debt financing, and intra-corporate financing.
Equity Financing
When the firm uses equity financing, it obtains capital by selling stock. Shareholders—those who buy the stock—gain a percentage of ownership in the firm and, often, a stream of dividend payments. The main advantage is that the firm obtains capital without debt. However, whenever new equity is sold, the firm’s ownership is diluted. Management also risks losing control if one or more shareholders acquire a controlling interest. Internationally, companies obtain equity financing in the global equity market—stock exchanges worldwide where investors and ...
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