Equity Financing
Short definition
Equity financing is putting capital in via new shares, convertibles or retained earnings. It has no maturity or mandatory coupon; dilution, control and dividend expectations are the cost.
Detailed explanation
Cash Ke is the dividend and exit expectation; it does not show as interest in the P&L. That is why equity looks “cheap”. Issue discount, fees and signalling raise all-in.
Internal equity (retained earnings) avoids issue cost but still has opportunity cost Ke. Minority and securities-law sale rules separately discipline who sells to whom.
Why it matters for the CFO
When the debt market is closed, equity closes the maturity wall. Dilution moves existing holders’ return and control.
How to read it
Price/book and the discount describe how expensive the issue is; Ke alone is not issue all-in.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.