Advantages And Disadvantages Of Raising Capital

Equity capital represents money put up and owned by shareholders. This money can be used to fund projects and other opportunities under the auspice of creating greater value. This type of capital is typically the most expensive. In order to attract

This step involves short and long term debt equity analysis. The proportion of equity capital depends on the possessing and additional funds will be raised. The choice of the source of funds the company has are the issue of shares and debentures, loans to be taken from banks and financial institutions and public deposits to be drawn in form of bonds. The choice will depend on relative merits and demerits of each source and period of financing. The management of the investment funds is key in allocating that the funds are going in the correct place. The profits that are made can be down in two ways dividend declaration which includes identifying the rate of dividends and retained profits in which the volume has to be decided which will depend upon expansion and diversification of the company. The management of cash is another important function. Cash is needed for all different aspects of the company such as payment of salaries, overhead and bills. All of these are important in a company and how successful the financial aspect is going to be.The financial management practices include capital structure decision, investment appraisal techniques, dividend policy, working capital management and financial performance assessment. A company needs to have well financial in order to be successful. “A company that sells well but has poor financial management can fail.” (Johnston)

Advantages- Less liability for stakeholders. Ability to raise funds/capital in the form of stocks as needed.

In general, using external funds, i.e. debt or equity, to finance increasing growth is riskier to the corporation. When issuing debt the company needs to be certain to cover both the repayment of the principal and the interest payments on time (because if they do not this could cause them to have problems securing financing in the future). When issuing additional shares of stock (equity) the value of existing traded stock is diluted (in proportion) and as such the current ownership might lose control (and may even be voted out by shareholders if dilution is substantial enough). Furthermore, with both debt and equity financing, a fast growing company needs to be aware that payments to either may hamper future expansion because payments that need to be send out in the forms of dividends or interest cannot be retained and invested in future projects.

Investment on securities such as shares, debentures, bonds are profitable as well as exciting. It is indeed rewarding but involves a great deal of risk. Shapiro (2006) describes the emergence and growth of the market for derivative instruments can be traced back to the willingness of risk averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. Kawaller, the President of Kawaller & Company, LLC and Managing Director of the Kawaller Fund in Brooklyn, NY (2008) analysed the prevailing scenario and stated that currency risk is an inherent aspect of international commerce. Fortunately, for enterprises that function in this space-particularly for those that transact with counterparties

The company position is strong enough so its better that company should use debt financing instead of equity financing.

The advantages of leveraging the company is the money they would save on the tax shield, higher EPS, higher dividend payouts, and extra cash available for expansion and repurchase of shares.

Secondly, if there would not be any need for cash and we would like to higher our stake on the company, thus getting more shares. Moreover, if the cash at that moment would not be crucial to our liquidity, getting more shares and betting on market value gains makes sense.

The third advantage is being able to outsource work when the need for production rises. Instead of having to hire additional employees to augment the increase in labor, a company will have a set staff and then when the need arises, they will hire out for the additional work to be completed.

McBride Financial Services, for instance, can raise capital by doing an IPO. This gives the company an opportunity to expand its business by becoming a part of the stock market and hence becoming well-known. This also provides enough funds to be put back into the company for profit, and for any other expenses necessary to remain successful and in existence. In the case of an acquisition, which is the taking over of another company, McBride will benefit because the company being acquired is already established. It takes less investment, time, and energy than to start-up a new company. A merger also can be a beneficial opportunity for

Speedup time to market. Because there are more people involved the process of innovation is faster

The SEC is responsible for implementing a series of regulatory initiatives required under the Dodd-Frank Wall Street Return and Consumer Protection Act (SEC, 2010). U.S. Securities and Exchange Commission’s (SEC) is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation (SEC, 2010). As a part of the SEC requirements, all companies that have $10 million or more in assets file annual reports. These companies must also have more than 500 owners.

Sources of finance refers to the ways of gathering various financial sources to meet the financial needs of the business. Furthermore, it states exactly how the companies are gathering and allocating finance to satisfy the requirements of the firm (Chandra, 2011). Firm either belong to existing or new categories that would need a varied amount of finance to meet the long and short term requirements such as construction, inventory, fixed assets and operating expenses (Hally, 2007).

Besides that, Company is easy to expand as they can issue shares and debentures to generate funds as capital.

Debt and equity financing are your two basic options to raise money for a start-up company or growing business. Debt financing includes long-term loans you get from the bank. Equity financing is private investor money you get in exchange for a share of ownership in the business. Now I want to explain about the advantages and disadvantages of using equity capital and debt capital to finance a small business's growth. The advantages of Debt is financing allows you to pay for new buildings, equipment and other assets used to grow your business before you earn the necessary funds. This can be a great way to pursue an aggressive growth strategy, especially if you have access to low interest rates. Closely related is the advantage of paying off your debt in installments over a period of time. Relative to equity financing, you also benefit by not relinquishing any ownership or control of the business. Interest on the debt can be deducted on the company's tax return, lowering the actual cost of the loan to the company. Raising debt capital is less complicated because the company is not required to comply