What is Profit&Loss (P&L) Statement ?

Definition : Also known as Income statement, is a financial statement which shows expenses and revenue of a company during a particular period, usually a fiscal quarter or year.
Read : What Is Balance Sheet ?
Income Statement helps to convey the status of a company i.e. Company is making profit or suffering losses. It is very important to read Income Statement of a company before investing, both of recent and past years.
Note : Revenue : Total amount received from sales of goods and services. Expenses : Total amount spend in producing final product or service.
Structure of P&L Statement  Income Statement is divided into Five main section - Net sales, Cost of Goods Sold, Gross Margin, Operating Expenses and Net Profit Before & After Income Tax (Or Net Loss in case of Loss).
Net Sales : It is the sum of Gross sales excluding its returns, allowances and discounts.Cost Of Goods Sold : Amount of money used to produce the final product. For example cost of inventory, merchandise purchased…

What Is Financing ? - Definition & Types - Debt And Equity Financing

Definition : Financing is the process of providing money or funds. For e.g. A  Firm need financing to raise its  new product, people take loans to purchase cars or house, etc. The one who provide funds to the needy, always take something in return  for using their money. For e.g. Banks charges interest to provide loans, IPOs or Angel investors take ownership equity in return of their investment and so on.

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Types of Financing : 

Debt financing 

Debt means loans. Similarly, Debt financing is the process of providing money to the firms with a promise to repay at some point in the future including additional fees or interest.

Example : Loans from bank by Firms to raise production or to launch new product, etc

Read : What Kind Of Investor Are You?

Equity financing 

Equity refers to an ownership interest in a business. So, Equity financing is the process of obtaining funds from public in exchange of ownership equity in the company.

Example : IPO (Initial Public Offer) , FOO (Follow-On Offering)

Note : An IPO - Initial Public Offer is the shares issued by the company to the public for the first time to raise fund. IPO is a part of primary market where investors buy shares directly from the company. Then after 3 working days company get listed to Stock Exchange i.e. NSE/BSE in India where other investors can able to buy shares from the investors who owns Shares purchased from company’s IPO. When an investor buy shares from other investor, it is done in secondary market. Investors who purchased share from IPO cannot sell their stakes back to the company but they can sell their shares to other investors in secondary market. Investors earn through capital appreciation and dividend. If the same company again issues more shares to the public( similarly as IPO) its called FOO.  We will learn about IPO and primary market and secondary market in separate article so please subscribe.

When the business develops, company needs more capital to satisfy market needs by increasing production, improving quality, etc. which ultimately requires huge capital. So, If the company decides to borrow capital from banks :

  • Company needs to pay the borrowed money back to the bank
  • Banks will charges additional fee or interest
  • Needs to pay on given time by the bank
But if the company raise fund from public through IPO :

  • Company no need to pay the money back to the shareholders. As if you buy shares in IPO you can sell it back.
Note : Buy Back Offer : Shareholders cannot usually sell their shares back to the company but Sometime company offers shareholders to sell their shares back to company, which is called Buy-back Offer. That is the only case when shareholders sell their shares back to the company. 

  • No need to pay any additional fee. 

Note : Company pay dividends to the shareholders which is not even compulsory. Decision to pay dividends totally depends on company’s board of director that they want to pay dividend or not.

  • As company no need to pay back the money, there is nothing like time schedule. Shareholders will earn based on company’s growth and dividend.

There are also other types of financing : 

Venture Capitalist

Venture Capitalist is a person or firm who provides capital to small, early-stage, emerging firms that are deemed to have high growth potential. They are group of  wealthy people who pool their money to invest in good Start-Up business ideas with the expectation to earn massive return by converting small start-up into a successful business. They always invest by proper analysis of the business. Few qualities they look for in business Start-Ups are :

  • Unique idea
  • Great product
  • Competitve advantage
  • Strong managment team
  • Target audience
  • Market needs
Some example of Top Venture Capitalist in India are ACCEL Partners (Sameer Gandhi), Sapphire Ventures (Jai Das), Mayfield Fund (Navin Chadda), etc.

Angel Investor

Also known as Business angels or Informal Investors. Defined as person who provide funding to small or early-stage business usually in exchange of ownership equity. They are usually old age wealthy people who are willing to help business Start-Ups to grow in a successful business. They are opposite of Venture Capitalist, as Venture Capitalist is a managed fund of many investor whereas Angel Investor use their own money. But both works for same goal i.e. to invest in small business and earn massive return after its success. 
To become an Angel Investor one must have minimum net-worth of ₹20 million as tangible asset and also need to register with SEBI (Security Exchange Board Of India) under AIF regulations.

Family Or Friends

Borrowing money from family members or friends. There are many advantages of taking money from them as you don’t need to pay any additional fee and you can even return money in later days based on mutual agreement. You don’t need to follow any guidelines or don’t even have to do any paper work. There are some disadvantage also such as your family or friend need to be that wealthy to take risks and money also causes relationship disturbance.


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