very new investor must have thought at first instance that why the owner of the companies share their profit with number of people. As it’s their own company and they can keep the profits to themselves only. But the thing is that the companies would need to raise money and for that they have to access others money and had to borrow it from people or by selling a fraction of the company, which is known as Issuing stock. The borrowing can be held by taking loan from the bank or by issuing BONDS, but this method comes under Debt financing. Issuing stock is also known as Equity Financing. In comparison of both “debt financing: and “issue Stock”, issue stock is much more advantageous as company doesn’t require to pay any interests. In return of the money paid, shareholders get a hope that sooner or later the share will be more than the amount they have paid. IPO, the initial public offering is the first sale of the stock which is issued by the private company.
The difference between the financing through debt and financing through equity is when u buy a bond you buy a debt investment as it is guaranteed that your money will be paid back to you that too with the assured interest. But this doesn’t happens with the equity investment, in that case, you also become one of the owner of the company, so returns are not guaranteed facing the risk of not being successful.
This isn't the case with an equity investment. By becoming an owner, you assume the risk of the company not being successful - just as a small business owner isn't guaranteed a return, neither is a shareholder. If shareholders enjoys the profit of the company, but they face the losses of their entire investment of the company also