Equity Capital: The Nature, Risk, and Reward

Equity capital is the remains in the way of assets after all debts and other charges are accounted for. Hence, equity capital sometimes called residual capital. It serves as the financial foundation of a company. Indeed, one can not launch any sort of business venture without equity funds.

Break-Even Point Analysis

We recognize that business generally has two types of costs. First, fixed cost. It is cost that inflexible and include such expense as interest, rent, property tax, and straight line depreciation expense that must be charged no matter the production quantity produced, either in bad or good season. The second, variable cost.It is related to the operating level of a company such as the number of labor and their working hours, raw material incurred, and  quantity based depreciation expense. Other variable costs, while they lend themselves to control, are not necessity directly affected by production levels. Thus, a company may as it sees fit reduce or enlarge expenditures for advertising and promotion, research or ground-keeping.

Financial Organization

A small business usually carries planning and control in a single individual, often a person heading up the whole company. Financial management in such this company is apt to be informal; it is simply a facet of the manager’s overall job guiding, coordinating, and controlling the activities of the firm.