Benefits of issue of securities, Financial Management

Benefits of Issue of Securities

Initial Public Offering (IPO) of securities gives instant recognition and visibility to the firm, helps to attract and retain skilled personnel, increases the value of existing shareholders and tapping a broad universe of investors. IPO issues also offers various other benefits to the companies. They are:

Access to Capital: Small companies usually offer securities in the market when they are planning for expansion.
Access to Additional Funds in Future: Companies who have already made public offerings can generate more funds through additional stock offerings. They can also obtain loans from traditional sources of finance at much better terms depending on their performance, increasing visibility and reputation, and rise in market value of equity.

Debt Swap: Companies can utilize a favorable market scenario, and issue equity securities at higher end of company valuation to pay off expensive debts. By doing so, companies can reduce the debt burden and maintain balance in the debt-equity ratio.
Drive for Professional Conduct: After the issue and listing of securities, companies are required to follow regular disclosure requirements like publication of results and performance of company as per Accounting Standards. These improve corporate governance practices, professionalism and regulatory awareness, and bring more transparency in organizational activity.

Flexibility in Deals: Mergers, takeovers and buy-outs can be carried out post a public offering. Not only does an IPO provide the necessary funds for an acquisition, but also acts like a collateral security as the stocks of a listed company are liquid instruments and tradable in recognized stock exchanges.

 

Posted Date: 9/10/2012 5:16:22 AM | Location : United States







Related Discussions:- Benefits of issue of securities, Assignment Help, Ask Question on Benefits of issue of securities, Get Answer, Expert's Help, Benefits of issue of securities Discussions

Write discussion on Benefits of issue of securities
Your posts are moderated
Related Questions
how would you judge the potential profit of Bajaj Electronics on the first year of sales to booth plastice and give your views to to increase the profit

The graphical representation of the relationship between yield and maturity is known as yield curve. Yield curve risk is the risk of experiencing an adverse

Q. Calculate the optimum amount of funds to transfer? The Baumol model is derived from the EOQ model and is able to be applied in situations where there is a constant demand fo

We have seen the valuation of bonds with embedded option using binomial model. This method can be used when cash flows do not depend on how interest rates evolve.

What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract? Answer: A futures or forward c

Board should encourage a strong control culture. Manager's bonus must not only be linked to company profits but also linked to internal control procedures being adhered to. There m

Q. Problems in computations of cost of retaining earning? Problems in computations of cost of retaining earning: it is sometimes argued that retained earning do not involve any

Rating denote an issuer's ability to respond to adverse changes in circumstances and economic conditions. The rating scale is generally differentiated into variou

State the major decision of financial management The major decision of financial management is the decision relating to dividend policy. The dividend must be analysed in relat

Q. What do you mean by Variable working capital? Permanent or fixed: Permanent or fixed working capital is the minimum amount which is required to ensure effective utilization