Non-Profit Enterprise in Market Economics

Question: Discuss about the Non-Profit Enterprise in Market Economics. Answer: The equity financing is defined as a methodology that helps to raise capital of a firm by selling the stocks of the corporation to its investors. Thus, in turn of the investment, the investors earn ownership interests to the firm. It can be said that the equity finance is more appropriate than any other sources of finance, especially for the long term funding companies, for example: banks. The reason behind this is that the banks are associated with long term bank loans. The major advantages of equity finance include firstly, the process of funding is associated with the business and the particular project. However, in this system, the shareholders can understand their investment only when the firm runs well (Nan and Wen 2014). Secondly, it helps to maintain with the costs of the serving bank loans and even with the debt finance that allows utilizing the capital for the activities of the business. Thirdly, the equity finance helps the external investors to expect regarding deliverin g values by the firm and thus it will aid in executing and exploring growth ideas. In addition to these, equity finance guides the venture capitalists to bring in valuable skills, experiences and contacts to the long term businesses. Therefore, it helps in expanding the long term funding companies. Furthermore, the equity finance also helps in making key decisions and strategy regarding operation of the business. As per the entrepreneur, the stakeholders also possess interest regarding the success of the business, its profitability ratio, continuous growth and expansion and raise in the value (Finnerty 2013). Lastly, it can be said that the equity finance assists the investors in providing follow-up funding with the growth of the organization. It has been found that maintenance of a healthy position of cash or cash reserve is considered as a vital factor for expanding a business. Therefore, the retained earnings are counted as profits that are kept within a corporation. Moreover, retained earnings of a firm are like personal savings account but it is for a company that is generally used in case of emergencies. Firms can run its daily operations by the help of its retained earnings. Additionally, this can assist the firm in capital investment or acquisitions, or can be used for paying expensive operating debts (Kaplan and Atkinson 2015). The expansion of the business is regarded as an important capital investment, thus, it has both merits and demerits. However, it has been found that advantages of retained earnings are relatively more than its total disadvantages. The reasons behind this include the process of funding by help of retained earnings is regarded as a powerful strategy for the businesses as it is not added to t he debt profile (James and Rose-Ackerman 2013). In addition to these, the particular conservative opinion also helps the firm to maintain and control the entire operations of the company and it reduces any kind of complication regarding new partners, creditors and external investors of the firm. Furthermore, internal funding through retained earnings assists the corporation to remain firmly in the seat of the driver. However, the process of retained earnings is slow; thus, opportunities of business might be missed out. References Finnerty, J.D., 2013.Project financing: Asset-based financial engineering. John Wiley Sons. James, E. and Rose-Ackerman, S., 2013.The Non-Profit Enterprise in Market Economics. Taylor Francis. Kaplan, R.S. and Atkinson, A.A., 2015.Advanced management accounting. PHI Learning. Nan, L. and Wen, X., 2014. Financing and investment efficiency, information quality, and accounting biases.Management Science,60(9), pp.2308-2323.