Example of capital structure of a company, Finance Basics

Example of Capital Structure of a Company

Example

Company XYZ restricted has the given capital structure as:

 

10,000 Sh.10 ordinary shares

10,000 Sh.20 preference shares

Total share capital

Shs.

100,000

200,000

300,000

Whether the company's assets proceeds were Sh.400, 000 illustrate how this would be shared under as:

i) Paripasu

ii) ½

Allocate participation taking on account the par value.

Solution

i)   Whether the preference shareholders are participative as:

 

Asset proceeds

Less preference claims

 

Less ordinary shareholders claim

Residue

Total share capital =

Sh.

400,000

(200,000)

200,000

(100,000)

100,000

300,000

Participative claim of ordinary shareholders is provided via:

(200,000/300,000)*100,000= 66,667

ii)   Sharing under  ratio

 

Asset proceeds

Less preference claim

 

Less ordinary share capital

Participative claim

Shs.

400,000

(200,000)

200,000

(100,000)

100,000

Preference share capital claim= (200,000/300,000)*1/2=1/3

(1/3)* 100,000=Shs.33, 000

Ordinary share capital claim=(1/3)*(1/2)=1/6

(1/6)*100,000=16,667%

Posted Date: 1/29/2013 4:13:20 AM | Location : United States







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