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

our assumptions about consumer behavior, 5.    A stockholder named Sue mus...

5.    A stockholder named Sue must cast a vote for chair of the board. Sue prefers Mr. Lee to Ms. Doe, Ms. Doe to Mr. James, and Mr. James to Mr. Lee. a. Are Sue's preferences c

Present value of an annuity, Let us assume you expect to obtain Rs.2000 yea...

Let us assume you expect to obtain Rs.2000 yearly for the next three years. The receipt of Rs.2000 is evenly divided. One part that is: Rs.1000 is obtained at the beginning of the

Prepare the journal entries, Prepare the journal entries required to record...

Prepare the journal entries required to record the following transactions of a nongovernment, not-for-profit organization.   1. Unrestricted cash contributions received durin

Taxtomy of intermediaries, Ask quwhats taxtonomy of intermediaries estion #...

Ask quwhats taxtonomy of intermediaries estion #Minimum 100 words accepted#

Does fluctuating demand facilitate collusion?, We consider two identical fi...

We consider two identical firms that produce the same good. The demand for that good is the function D(p) = 1 - p where p is the unit price. Firms incur no cost. The competition

Prepare a master budget, Prepare a master budget You have just been hi...

Prepare a master budget You have just been hired as a new management trainee by XYZ Limited, a distributor of earrings to various retail outlets located in shopping malls acro

Need help completing self assessment return, I am an AAT student studying l...

I am an AAT student studying lvl 3 AAT at college. I wish to learn how to complete self assessment end of year tax return forms for other people. That is because I have already bee

AFM, I need help with assignment completeion

I need help with assignment completeion

Prepare a statement to show the total production overheads, Aristo Ltd uses...

Aristo Ltd uses a system of absorption costing. The product passes through a machining department and an assembly department before it is completed. The assembly department is labo

What is the double taxation issue with corporation profits?, An intersting ...

An intersting point to not is that there is a difference in the tax treatment of income from Limitied Liability Companies (LLCs) and Corporations. What is this difference and what

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