Business and Management

2 (FINANCE AS A RESOURCE)

ASSESS AND COMPARE THE COSTS OF ABOVE MENTIONED SOURCES OF FINANCE.

A company might raise new funds from the following sources:

The capital markets:

i) New share issues, for example, by companies acquiring a stock market listing for the first time

ii) Rights issues

 Loan stock

 Retained earnings

 Bank borrowing

 Government sources

 Business expansion scheme funds

 Venture capital

 Franchising.

Ordinary (equity) shares

Ordinary shares are issued to the owners of a company. They have a nominal or 'face' value, typically of $1 or 50 cents. The market value of a quoted company's shares bears no relationship to their nominal value, except that when ordinary shares are issued for cash, the issue price must be equal to or be more than the nominal value of the shares.

Deferred ordinary shares

Are a form of ordinary shares, which are entitled to a dividend only after a certain date or if profits rise above a certain amount. Voting rights might also differ from those attached to other ordinary shares.

Ordinary shareholders put funds into their company:

a) By paying for a new issue of shares

b) through retained profits.

New shares issues

A company seeking to obtain additional equity funds may be:

a) An unquoted company wishing to obtain a Stock Exchange quotation

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b) An unquoted company wishing to issue new shares, but without obtaining a Stock Exchange quotation

c) A company which is already listed on the Stock Exchange wishing to issue additional new shares.

EXPLAINING THE IMPORTANCE OF FINANCIAL PLANNING

Financial planning

it is a process which presents before an individual,...