Finance6666

There are several ways of financing a company, these vary depending on the structure and size of the company itself. The concept of " finance" includes several ways of doing it that usually go together.

A common way in which companies increase their funds is by becoming a public company, what technicaly is known as a flotation, which will involve issuing shares. The main advantage of this meassure is that the company doesnt have to pay interests but dividends.The main disadvantage is that almost any shareholder with a big amount of these shares can join the board of directors, even with no economic knowledge.

Once a company starts trading successfully, it will ultimately make profit. The directors will decide how it uses any profit, and a substantial amount will usually be distributed to the shareholders as a return on their investment in shares. However, part of the company’s profits will be retained in the company to provide working capital and to finance other funding requirements. The main disadvantage is that not always a company has enough profits to develop this.

In many cases, it is necessary for companies who require considerable funding to borrow by way of a loan, usually. This will provide a flexible and reliable source of funds and allow for diverse methods of borrowing capital stock.When the bank and the company have reach an agreement in terms of the loan, the company can access to that money instantly but on the other hand the company will have to pay interests for the loan.

Another way of financing a company is by issue of bonds. The issue of bonds, increases the company’s liquidity and, compared to shares, the company that issues it does not lose any of the management control.The main disadvantage is that the shareholder receives nothing until all the debts of the company have been paid off but in contrast this is good for the company.

The kee solution to a successful financiation is to achieve a proper balance between all of these measures.

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