Companies need money to bridge the difference between paying for the creation of completed goods and receiving money using their customers (working capital). This is made up of long-term finance mainly. Long-term finance can be defined as the ones that are due for payment after one year. Equity finance- Equity relates to ordinary shares only and it is the investment in a company by ordinary share holders. Collateral capital is elevated through the sale of stocks to organizations or individuals.
Ordinary stocks in the collateral of a business entitled the holders to all distributed profits. · They might be in a position to make a capital gain on the investment by offering their share holding at a later time when the price increases. Preference stocks- They are designed for investors who do not wish to take the amount of risk associated with being an ordinary talk about holder.
This is the most valuable form of fund and forms the backbone of the financial constructions of businesses. Many businesses rely on loan capital to finance their procedures. Debentures- They are written acknowledgement of a debt by an organization. It usually contains a provision of payment of interest and terms for the repayment of the principal as well.
· Debentures are traded on stock marketplaces just like shares. · They may be cheap, since it is less risky for investors. This is traded debts gives the holder the to convert to other securities usually ordinary shares at a given future price time at a given price. The investor remains a lender to the business and would be paid a pastime. The investor is not appreciated to convert the loan into regular shares.
This is a service provided by financial institutions known as factors. The factor takes over the debts assortment of the business. Capital markets deal in long-term finance through the stock exchange. · Eurobonds bonds dominated in a currency besides that of the national currency of the issuing company. It offers nothing to do with Europe. They are also called international bonds.
The money market is not just one market but a number of different markets are closely inter-connected with each other. The main participants in the amount of money markets are central banks and the commercial banking institutions. The stock market is a market which issued securities of open public companies. Government bonds, loans released by local government bodies and other public owned by establishments and some overseas stocks.
The currency markets assist the location of capital to industry. If the marketplace thinks of a company highly, the shares of this company will rise in value and it would be able to raise fresh capital through the new concern market at a very low priced. Ken Wong Ltd approaches to a lender for a long-term loan. What do you consider would be the primary factor that financial institution will take into account when considering the application form. 2. FTC Foulk Lynch 2005- Financial Management and Control.
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