{"id":54134,"date":"2026-04-03T11:45:32","date_gmt":"2026-04-03T11:45:32","guid":{"rendered":"https:\/\/certifeka-edu.com\/programs\/finance-for-strategic-managers-accounting-module-2\/lessons\/lesson-3-classification-according-to-ownership-and-control-3-2\/"},"modified":"2026-04-03T11:45:32","modified_gmt":"2026-04-03T11:45:32","slug":"lesson-3-classification-according-to-ownership-and-control-3-2","status":"publish","type":"lesson","link":"https:\/\/certifeka-edu.com\/ar\/programs\/executive-financial-analysis-module-ucam-university\/lessons\/lesson-3-classification-according-to-ownership-and-control-3-2\/","title":{"rendered":"Lesson 3: Classification according to Ownership and Control"},"content":{"rendered":"

\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Lesson 3: Sources Of Finance Identification and Suitability\u200b<\/h2>\n

Classification According to Ownership and Control
\n<\/h3>\n

In this classification we will discuss 2 sources of Ownership and control and their advantages & disadvantages.<\/h5>\n
\n\n\t\t\t\t\t Owned Capital
\n\t\t\t<\/path><\/svg>
\n\t\t\t<\/path><\/svg>
\n\t\t\t\t\t\t<\/summary>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Owned capital also refers to equity. It is sourced from promoters of the company or from the general public by issuing new equity shares. Promoters start the business by bringing in the required money for a startup.<\/h5>\n
Advantages of Owned capital “equity capital” are as follows:<\/h5>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

It is a long-term capital which means it stays permanently with the business.<\/h5>\n
There is no burden of paying interest or installments like borrowed capital.<\/h5>\n
So, the risk of bankruptcy also reduces. Businesses in infancy stages prefer equity for this reason
Disadvantages of Owned capital “equity capital” are as follows:<\/h5>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Dilution of ownership and operational control Where the company owners must give up a portion of their ownership and dilute their control.<\/h5>\n
If the company becomes profitable and successful in the future, a certain percentage of company profits must also be given to shareholders in the form of dividends.<\/h5>\n
Lack of tax shields Compared to debt, equity investments offer no tax shield.<\/h5>\n
Dividends distributed to shareholders are not a tax-deductible expense, whereas interest payments are eligible for tax benefits. It adds to the cost of equity financing.<\/h5>\n<\/details>\n
\n\n\t\t\t\t\t Borrowed Capital
\n\t\t\t<\/path><\/svg>
\n\t\t\t<\/path><\/svg>
\n\t\t\t\t\t\t<\/summary>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Borrowed or debt capital is the finance arranged from outside sources.<\/h5>\n
Debt financing occurs when a company raises money by selling debt instruments, most commonly in the form of bank loans or bonds.
Such a type of financing is often referred to as financial leverage.<\/h5>\n
In this type of capital, the borrower has a charge on the assets of the business which means the company will pay the borrower by selling the assets in case of liquidation.<\/h5>\n
Another feature of the borrowed fund is a regular payment of fixed interest and repayment of capital<\/h5>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Advantages of Borrowing are as follows:
There is no dilution in ownership and control of the business.<\/h5>\n
The cost of borrowed funds is low since it is a deductible expense for taxation purpose which ends up saving on taxes for the company.<\/h5>\n
It gives the business the benefit of leverage.<\/h5>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Disadvantages of Debt Financing
The need for regular income The repayment of debt can become a struggle for some business owners.<\/h5>\n
They need to ensure the business generates enough income to pay for regular installments of principal and interest.<\/h5>\n
Many lending institutions also require assets of the business to be posted as collateral for the loan, which can be seized if the business is unable to make certain payments.<\/h5>\n
Adverse impact on credit ratings<\/h5>\n
If borrowers lack a solid plan to pay back their debt, they face the consequences.<\/h5>\n
Late or skipped payments will negatively affect their credit ratings, making it more difficult to borrow money in the future.<\/h5>\n
Potential bankruptcy<\/h5>\n
Agreeing to provide collateral to the lender puts their business assets at risk, and sometimes even their personal assets.<\/h5>\n
Above all, they risk potential bankruptcy.<\/h5>\n
If the business should fail, the debt must still be repaid.<\/h5>\n<\/details>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Owned capital also refers to equity. It is sourced from promoters of the company or from the general public by issuing new equity shares. Promoters start the business by bringing in the required money for a startup.<\/h5>\n
Advantages of Owned capital “equity capital” are as follows:<\/h5>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

It is a long-term capital which means it stays permanently with the business.<\/h5>\n
There is no burden of paying interest or installments like borrowed capital.<\/h5>\n
So, the risk of bankruptcy also reduces. Businesses in infancy stages prefer equity for this reason
Disadvantages of Owned capital “equity capital” are as follows:<\/h5>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Dilution of ownership and operational control Where the company owners must give up a portion of their ownership and dilute their control.<\/h5>\n
If the company becomes profitable and successful in the future, a certain percentage of company profits must also be given to shareholders in the form of dividends.<\/h5>\n
Lack of tax shields Compared to debt, equity investments offer no tax shield.<\/h5>\n
Dividends distributed to shareholders are not a tax-deductible expense, whereas interest payments are eligible for tax benefits. It adds to the cost of equity financing.<\/h5>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Borrowed or debt capital is the finance arranged from outside sources.<\/h5>\n
Debt financing occurs when a company raises money by selling debt instruments, most commonly in the form of bank loans or bonds.
Such a type of financing is often referred to as financial leverage.<\/h5>\n
In this type of capital, the borrower has a charge on the assets of the business which means the company will pay the borrower by selling the assets in case of liquidation.<\/h5>\n
Another feature of the borrowed fund is a regular payment of fixed interest and repayment of capital<\/h5>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Advantages of Borrowing are as follows:
There is no dilution in ownership and control of the business.<\/h5>\n
The cost of borrowed funds is low since it is a deductible expense for taxation purpose which ends up saving on taxes for the company.<\/h5>\n
It gives the business the benefit of leverage.<\/h5>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n

Disadvantages of Debt Financing
The need for regular income The repayment of debt can become a struggle for some business owners.<\/h5>\n
They need to ensure the business generates enough income to pay for regular installments of principal and interest.<\/h5>\n
Many lending institutions also require assets of the business to be posted as collateral for the loan, which can be seized if the business is unable to make certain payments.<\/h5>\n
Adverse impact on credit ratings<\/h5>\n
If borrowers lack a solid plan to pay back their debt, they face the consequences.<\/h5>\n
Late or skipped payments will negatively affect their credit ratings, making it more difficult to borrow money in the future.<\/h5>\n
Potential bankruptcy<\/h5>\n
Agreeing to provide collateral to the lender puts their business assets at risk, and sometimes even their personal assets.<\/h5>\n
Above all, they risk potential bankruptcy.<\/h5>\n
If the business should fail, the debt must still be repaid.<\/h5>","protected":false},"comment_status":"open","ping_status":"closed","template":"","class_list":["post-54134","lesson","type-lesson","status-publish","hentry"],"yoast_head":"\nLesson 3: Classification according to Ownership and Control - Certifeka-edu<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/certifeka-edu.com\/ar\/programs\/executive-financial-analysis-module-ucam-university\/lessons\/lesson-3-classification-according-to-ownership-and-control-3-2\/\" \/>\n<meta property=\"og:locale\" content=\"ar_AR\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Lesson 3: Classification according to Ownership and Control - Certifeka-edu\" \/>\n<meta property=\"og:description\" content=\"Lesson 3: Sources Of Finance Identification and Suitability\u200b Classification According to Ownership and Control In this classification we will discuss 2 sources of Ownership and control and their advantages & disadvantages. 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