Finance8888

There are different ways of financing a company. Each company must look for the one that best suits it. The most common sources of financing are:

-SHARE CAPITAL. The main disadvantage of this way of financing is that it is usually not enough to cover all the company┬┤s needs unless it is a very small company. On the other hand, it has a lot of advantages. The shareholders do not have to receive an interest rate; the company does not have to return the money to the shareholders so there is no maturity date. Another advantage is the possibility to choose whether to give the profits to the shareholders as dividends or to keep them as retain profits in order to use them in future years. The company can also increase its share capital just by paying a tax.

-BANKING FINANCING. Here it is included all kind of bank loans. It has many disadvantages for the company. Firstly, it is a more expensive source of financing because the company must return the money and pay an interest rate for the loans. Finally it has a maturity date. But not everything are disadvantages, there are some advantages too such as it is a quicker financing and the company and the company would keep good relationships with the bank.

In conclusion, we could say that each company is different from the others and must look for its personal financing. In general, it is better for the companies the share capital financing than the banking financing, but the success of the company will depend on the perfect balance of these two sources.

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