![]() ![]() Raising capital through debt is the traditional way of raising money which completely exposes your company to bankruptcy. The concept of people buying shares low and selling shares high is worth noting when raising funds via equity. This is terribly risky and rather unethical, but also innovative and it catches most companies off guard. This allows your company to gain huge amounts of capital using a “build and sink” strategy for your company on a manipulated stock price. Then after purposefully executing a bad fiscal year, buy back the shares when the stock price has sunk. The strategy is to build a financially strong company and sell shares when the stock price is high. I have learned an intriguing strategy from 2 successful Industry Champions. ![]() The advantage of selling equity is that there’s no risk of bankruptcy. The loss of shares decreases your Return on Equity ratio (ROE) and Earnings Per Share ratio (EPS). Equity is the alternative to debt in raising capital through the sale of common shares. Defaulting upon your loan also causes your credit rating and stock price to drop. Bankruptcy occurs if you default upon your loan for 3 consecutive years. By financing your company via debt, you accept risk of bankruptcy. Companies need to raise funds using either debt or equity. ![]() ![]() When playing the Business Strategy Game ( BSG), none of the companies have much money in year 11. ![]()
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