How does an investor make money for a company? When an investor “invests” in a company, how does the company benefit? do they make money and how? does it affect the company’s financials?

Typically, an investor injects capital in and obtains an ownership interest in the company. The company benefits as it gets the capital it needs to pay operating expenses, purchase needed assets, and/or retire debt. The investor benefits if and when the company earns a net profit by receiving a distribution of that profit commensurate to the extent of his/her investment.

The effect on the company’s financials is that the injected capital is recorded as equity on the company’s balance sheet.

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