What is the effect of the source of finance in public and private institution?

Answer 1

The source of finance has a bearing on the costs incurred by that company. As you know, most institutions have three potential sources of funds; Debt Financing, Equity Financing and Grants or Subsidies from Government. The later of the three is quite rare and so is normally ignored. In making a choice between debt and equity companies must weigh the costs against the benefits. Equity is generally considered to be cheaper than debt financing, for a number of reasons, including the timing of the cash outflows to the source of funds. The DuPont equation however, brings to light the many benefits of leveraging (i.e. the use of debt financing) to companies and the equity shareholders. In brief, the DuPont Equation points out that an entrepreneur (or shareholder) can earn excess returns by leveraging his investment portfolio, provided that the return earned from that portfolio is greater than the cost of the debt used. The excess return is the portion of the return earned on borrowed dollars, that isn't paid back to the lender as interest.

That's all I can give you for now, but I encourage you to read more. There is quite a substantial amount of literature on this subject given that it is one of the three most important decisions in Finance. These are, the investment decision, the dividend decision and (your question) the financing decision.