Jurisdiction(s):
United Kingdom

Key definition

Equity definition

What does Equity mean? In corporate finance practice, equity means the risk-bearing capital provided by a company’s owners, usually through ordinary shares, as distinct from debt finance. Equity holders have the residual interest in profits and assets: returns are by dividend or capital growth, and they rank behind all creditors on insolvency. Equity commonly carries voting and control rights and is subject to company law capital maintenance and distribution rules (for example, dividends only out of distributable profits and statutory pre-emption on new share issues unless disapplied). It is central to capital structure, M&A, venture capital and private equity transactions. Practitioners also describe certain...

Project finance financial models: feasibility, base case and assumptions; purpose, facility agreement use, covenants and undertakings; lender approvals, sensitivities and model audit

Published by a LexisNexis Banking & Finance expert

Practice notes

Before proceeding with a potential project, the intended sponsor must prepare a 'feasibility study' to assess and judge the project's viability. That study reviews the principal aspects of the proposal, including, for example:

issues relating to the economics of the project
technical matters
contract terms
any necessary government support
market need for the project

If, having considered the analysis, the sponsor determines the project is feasible, the study is then commonly used in practice to present the proposal to the prospective lenders and equity investors. A core element of the feasibility study is the 'financial model'. This Practice Note sets out what a financial model is, what it is used for, and how it is checked by the lenders. For more detail on the contents of the feasibility study, see Practice Note: Project finance—due diligence and 'bankability'—Technical due diligence/feasibility study in project finance transactions.

What is a financial model?

In the context of a project finance transaction, a financial model is a spreadsheet which is used to generate, among other things, the forecast revenues and outgoings of the project...

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Web page updated on 21/05/2026

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