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Types Of Equity And Debt Instruments
Length: 8 pages (2116 Words)
Types of Equity and Debt instruments
Equity instruments refer to the business documents that are utilized as legally binding, thus can comfortably be enforced by the evidence that a business owner have the right to possession and ownership of all the business pursuits being run by a firm. Ordinarily, equity instruments are declared by the start-up company to the willing investors who finance various projects initiated by the company. There are multiple documents used today as equity instruments. These documents include share or stock certificate, warrants, equity shares, preference shares and stock (Weiss 2009).
When a start-up company joins an agreement with a financial institution so as to be funded via equity, they have to be completely aware that part of the ownership of the start-up will be taken over by the financial institution. Legally, these investors are permitted to have some level of control on how the start -up business will be run so that they can have a return on the amount they invest. Generally, start- up ventures can declare stocks as shares to the speculating shareholders. Therefore, the more the number of shares that a financial institution gains from the start-up company, the greater the level of possession of the firm; hence, the financial institution exercises greater decisive power and influence in the day to day operations of the company (Parameswaran et al.2011).