Equity financing – from fund raiser point of view
Money without the hassle of repayment or interest.

Advantages to equity financing:

• Its less risky than a loan because you dont have to pay it back, and its a good option if you cant afford to take on debt.You tap into the investors network, which may add more credibility to your business.
• Investors take a long-term view, and most don’t expect a return on their investment immediately.
• You wont have to channel profits into loan repayment.
• You will have more cash on hand for expanding the business.
• There’s no requirement to pay back the investment if the business fails.

Disadvantages to equity financing:

• It may require returns that could be more than the rate you would pay for a bank loan.
• The investor will require some ownership of your company and a percentage of the profits. You may not want to give up this kind of control.
• You will have to consult with investors before making big (or even routine) decisions — and you may disagree with your investors.
• In the case of irreconcilable disagreements with investors, you may need to cash in your portion of the business and allow the investors to run the company without you.
• It takes time and effort to find the right investor for your company.

Debt financing
Advantages to debt financing:

• The bank or lending institution (such as the Small Business Administration) has no say in the way you run your company and does not have any ownership in your business.
• The business relationship ends once the money is paid back.
• The interest on the loan is tax deductible.
• Loans can be short term or long term.
• Principal and interest are known figures you can plan in a budget (provided that you don’t take a variable rate loan).

Disadvantages to debt financing:

• Money must paid back within a fixed amount of time.
• If you rely too much on debt and have cash flow problems, you will have trouble paying the loan back.
• If you carry too much debt you will be seen as “high risk” by potential investors – which will limit your ability to raise capital by equity financing in the future.
• Debt financing can leave the business vulnerable during hard times when sales take a dip.
• Debt can make it difficult for a business to grow because of the high cost of repaying the loan.
• Assets of the business can be held as collateral to the lender. And the owner of the company is often required to personally guarantee repayment of the loan.

Bonds
Businesses often need loans to fund operations, move into new markets, innovate and grow in general. But the amount they need often surpasses what a bank can provide. So another useful way for corporations to raise the necessary funds is to issue bonds to whoever wants to buy them.

When you buy a bond, you’re lending money to the organization that issues it. The company, in return, promises to pay interest payments to you for the length of the loan. How much and how often you get paid interest depends on the terms of the bond. The interest rate, also called the coupon, is typically higher with long-term bonds

F­or you, the lender, a bond is a kind of investment, like a stock. The difference is that stocks aren’t loans. Rather, stocks represent partial ownership in a company, and the returns represent a share in profits. For that reason, stocks are riskier and more volatile — they closely reflect the success of a company. Bonds, on the other hand, often have a fixed interest rate. Some bonds, however, are floating-rate bonds, meaning their interest rates adjust depending on market conditions.Like stocks, bonds can be traded. When someone sells a bond at a price lower than the face value, it’s said to be selling at a discount. If sold at a price higher than the face value, it’s selling at a premium.

Alternative investment
Investments other than Stocks, Bonds and Equity comes under alternative investments.

It includes tangible assets such as precious metals, art, wine, antiques, coins, or stamps and some financial assets such as commodities, private equity, hedge funds, carbon credits, venture capital, forests/timber, film production and financial derivatives.

Difficult to predict the actual cost since it primarily lack a good quality data.They are relatively illiquid. It is very hard to determine its current market value

Dividend
Corporations may pay out part of their earnings as dividends to you and other shareholders as a return on your investment. Share dividends, which are generally paid yearly, are in the form of cash.

Dividend is always calculated on this face value.

Suppose you own 100 shares of XYZ bank. The face value of shares is Rs 10 each. Then the Total face nominal value of your holding is Rs 1000. (This is independent of the purchase value of the shares).

If the dividend declared is 110%, it is calculated on the face value of shares. For example, you will get a dividend of 1100 on your shares. That means, the dividend per share is Rs 11.

Dividend payout ratio
You can calculate a dividend payout ratio by dividing the dividend a company pays per share by the company’s earnings per share.

Dividend yield
If you own dividend-paying shares, you figure the current dividend yield on your investment by dividing the dividend being paid on each share by the share’s current market price. Dividend yield, which increases as the price per share drops and drops as the share price increases, does not tell you what you’re earning based on your original investment or the income you can expect to earn in the future. However, some investors seeking current income or following a particular investment strategy look for high-yielding shares.

How to Calculate Dividend Yield?
Not all of the tools of fundamental analysis work for every investor on every stock. If you are a value investor or looking for dividend income then there are a couple of measurements that are specific to you. For dividend investors, one of the telling metrics is Dividend Yield.

This measurement tells you what percentage return a company pays out to shareholders in the form of dividends. Older, well-established companies tend to payout a higher percentage then do younger companies and their dividend history can be more consistent.

You calculate the Dividend Yield by taking the annual dividend per share and divide by the stock’s price.

Dividend Yield = Annual dividend per share / Stock’s price per share

For example, if a company’s annual dividend is Rs. 1.50 and the stock trades at Rs. 25, the Dividend Yield is 6%. (Rs. 1.50 / Rs. 25 = 0.06)

Dividend usually declared by the companies in % terms to the face value of the share. For Example, Company trading at Rs. 50 with a face value of Rs. 10 per share declares 10% dividend. That means company will pay dividend of Rs. 1 per share to its share holders. Hence in such a case, Dividend Yield is 2% (Rs. 1 / Rs. 50 = 0.02)