The common sources for equity funding for a firm are common stock and preferred stock. The dividends for a common stockholder are not fixed and certain while the preferred stockholders are given a fixed dividend amount every year. Moreover, the preferred stockholders are given preference over common stockholders in case of liquidation for a firm.

The sources of debt financing are prominently loans, bonds and line of credit. The loans and line of credit are usually issued by financial institutions to meet investment and operational needs. On the other hand, the bonds may be issued to retail or institutional investors.