Adidas & Its Source of Finance

Adidas is a public limited company that specializes in sportswear and running shoes. As a public limited company, Adidas receives its main source of finance from share capital. Share capital refers to the money that is raised from selling shares in the company, as shown in the firm’s balance sheet. This is a type of an external source of finance.

Having share capital as the main source of finance for Adidas is very advantageous because it provides a huge amount of capital for the company. In addition, public limited companies can sell their shares on stock exchange to the public whereas private limited companies cannot; this gives them a competitive edge. Adidas mainly uses ordinary share, or equity capital, which is where the dividends received by the stockholders are unknown beforehand because the shares are based on the profits that the company makes each year, which will fluctuate. Since the dividends and annual profits change each year, this can cause distress to the short-term investors, which might cause them to pull out their shares, which is disadvantageous for Adidas. Since the dividends are not fixed, ordinary shares are riskier than preference shares; however, during a great trading period, investors will receive a lot of money than those that own preference shares.

 

Source:

http://www.adidas-group.com/en/investorrelations/financial_data/default.aspx

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