Which of the following best describes equity finance?

Equity finance is best described as funds generated by selling shares of the company. This form of financing involves raising capital through the sale of shares to investors, who then become part-owners of the company. When a company issues shares, it is essentially offering ownership stakes to the investors, allowing them to participate in potential profits through dividends and to benefit from any appreciation in share value over time.

Utilizing equity finance can be particularly advantageous for businesses looking to expand without the obligation of repayment, as is the case with debt financing, where loans must be repaid regardless of the business's performance. Instead of increasing liabilities, equity finance increases the company’s capital base while also sharing the inherent risks of the business venture with its shareholders.

The other options reflect different types of financial resources or income streams. For example, funds sourced through loans pertain to debt financing rather than equity, income retained for reinvestment refers to reinvested profits (retained earnings), and government grants and subsidies signify non-repayable funds from government sources, which are not directly related to equity finance. Each of these represents a different approach to funding a business that does not encompass the concept of acquiring capital through equity ownership.