Show equity and debt issues, Financial Accounting

Assignment Help:

A company is necessary by law to offer an issue of new equity finance on a pro-rata basis to its existing shareholders. This makes sure that the existing pattern of ownership and control will not be affected if all shareholders take up the new shares offered. For the reason that the right to be offered new equity is a legal one such an issue is called a rights issue.

If an unlisted company make a decision that it needs to raise a large amount of equity finance and provided existing shareholders have agreed it can offer ordinary shares to new investors (the public at large) via an offer for sale. Such an propose is usually part of the process of seeking a stock exchange listing as it leads to the wider spread of ownership that is needed to meet stock exchange listing regulations. An offer for sale perhaps either at fixed price where the offer price is set in advance by the issuing company or by tender where investors are invited to submit bids for shares. An offer for sale will result in an important change to the shareholder structure of the company for example by bringing in institutional investors. In order to makes sure that the required amount of finance is raised offers for sale are underwritten by institutional investors who guarantee to buy any unwanted shares.

A placing is cheaper in comparison of an offer for sale. In a placing huge blocks of shares are placed with institutional investors so that the spread of new ownership is not as wide as with an offer for sale. While a placing may be part of looking for a listing on a stock exchange (for example it is very popular with companies wanting to float on markets for smaller companies such as the Alternative Investment Market in the UK) it can as well provide equity finance for a company that wishes to remain unlisted.

New shares can as well be sold by an unlisted company to individual investors by private negotiation. While the amount of equity finance increased by this method is small it has been supported in recent years by government initiatives such as the Enterprise Investment Scheme and Venture Capital Trusts in the UK.


Related Discussions:- Show equity and debt issues

Evaluation of net working capital, Q. Evaluation of Net working capital? ...

Q. Evaluation of Net working capital? The evaluation presumes that several key variables will remain constant such as the inflation rates, discount rate and the taxation rate.

Static balancing-dynamic balancing-field balancing, Static Balancing : Th...

Static Balancing : This balancing is complete in the plane of unbalance. Dynamic Balancing : In this case two balance planes are needed because forces along couples are to

Objectives of time value of money, After going through this section, you mu...

After going through this section, you must be capable to: -          Identify the time value of money; -          Know what gives money its time value; -          Identify

On January 7, On January 7, 2016, Captec Company purchased $4,175 of suppli...

On January 7, 2016, Captec Company purchased $4,175 of supplies on account . In Captec Company’s chart of accounts , the Supplies account is No. 15, and the Accounts Payable accoun

Financial ratio assignment, Critical Thinking Exercise Instructions: select...

Critical Thinking Exercise Instructions: select a company , Wendy''s or McDonald''s . Perform a Google search, key in McDonalds or Wendys Key financial ratios. I suggest you use f

Explain the favorable variance, Question: The manager of Ben and Jerry's Ic...

Question: The manager of Ben and Jerry's Ice Cream is told that the direct material quantity variance for cherries in Cherries Garcia Ice cream is favorable. What could explain thi

3 Column Cash Book Transaction, I have tried to answer this assignment wit...

I have tried to answer this assignment with no luck. Balance brought forward : Cash in Hand : $5000 Cash at Bank : $ 90,000 March 2 Received Cash loan of $25 ,0

Prepare journal entries to record the above transactions, On January 1, 201...

On January 1, 2010, Anderson Corporation had 60,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred: Mar. 1 Issued

Determine pension expense for the year ended december 31, Part A: The follo...

Part A: The following information relates to Company A's defined benefit pension plan during the current fiscal year: Plan assets (beginning of the year) $400 (all number are in $m

Accounting for partnerships, Accounting for Partnerships The owners’ in...

Accounting for Partnerships The owners’ interests in the business are divided into long term and short-term interests. (Long-term interests refer to original capital commitment

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd