10733_CH03.

QXD 26/10/07 14:18 Page 33

part two

Sources of Finance

list of chapters
3 Capital markets 5 Loan capital and other sources of finance
4 Share capital

Overview
For many companies, the most important source of funding for investment is retained profit –
money generated and retained by the business. However, at other times when they need large
amounts of new capital (particularly when they are first set up) companies have recourse to
external sources of finance.

Chapter 3 describes the role of capital markets, most importantly stock markets. It explains the
function of UK stock markets, including the Main Market and other markets for ordinary shares,
the role of institutional investors and other financial markets related to the stock market. These
include the London money market and options markets.

Chapter 4 explains what is involved in issuing new ordinary shares, the considerations
determining dividend policy and the circumstances in which companies may repurchase their
shares.

Chapter 5 introduces debt and other forms of loan capital and describes other sources of
capital, including sources of finance for small businesses.
10733_CH03.QXD 26/10/07 14:18 Page 34