Basic Instruments For Business Financing - SS1 Economics Lesson Note

Basic instruments for business financing refer to the various financial tools or securities that companies use to raise capital from investors. The three most common instruments for business financing are shares, debentures, and bonds.

• Shares: Shares represent ownership in a company and are also known as stocks. When a company issues shares, investors can buy them and become shareholders. Shareholders have the right to vote on important company decisions and receive a portion of the company's profits in the form of dividends.

Debentures: Debentures are a type of debt instrument that a company issues to raise funds from investors. Unlike shares, debentures do not represent ownership in the company. Instead, debenture holders are creditors and have a claim on the company's assets and income.

Bonds: Bonds are also a type of debt instrument that companies issue to raise funds from investors. Bonds are similar to debentures, but they are typically issued in larger denominations and have a longer maturity period.