In the scenario of uncertain cash flow, which is undeniably the most common limitation of many new companies, Equity increase plays a significant role. Increase in equity raises money for the start-up companies and growing businesses. The share capital of a company can be increased by issuing new shares. The best part about equity increase or equity financing is that there is no fixed obligation to pay dividends. Apart from this, it allows the company to share risks and liabilities of company ownership with the new investors. Equity Increase further allows the company to grow or diversify into other areas.
Equity is increased in order to raise more capital for the company. Increase in equity is a blessing for any business as it finances the pending projects of the business. Moreover, in depressed market situation, equity increase proves to be very beneficial.
An increase is an equity should be done as per the needs of the business. In case, a company doesn’t need any capital, it’s good to refrain from raising equity as it’s not a sound decision from company’s perspective. On the other side, if the company is unable to raise the capital at the time of need, it can be bad for its functioning.