Preview

Share Capital Increase of Unlisted Limited Companies

Better Essays
Open Document
Open Document
1906 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Share Capital Increase of Unlisted Limited Companies
SHARE CAPITAL INCREASE OF UNLISTED LIMITED COMPANIES Limited companies nowadays have undoubtedly established their importance in the development and evolution of the global economy. Their particular legal and actual form, in conjunction with the financial figures they usually represent have turned these specific entities into a springboard of capital growth and expansion. Because of the great importance held by limited companies in the functioning of the national, but also the global economy, the need to offer to each of them the possibility of adjusting its capital arises. Thus, a limited company can meet the special circumstances that occur at any time in the industry and in the place(s) it is active in1. However , in several cases, in order to expand its turnover or upgrade the services provided a limited company is required to increase its share capital so as to meet new needs2. This increase of capital, commensurate with the special characteristics and the way it is implemented, is divided into several classifications. In the context of this piece of work, reference will be made to a relatively unusual way of share capital increase by capitalization of liabilities. This can be considered as an outstanding case of application of creative accounting from a limited company, since we can identify an effort to ‘embellish’ the company’s financial data. In that way the company covers the needs of capital change by utilizing liabilities. This case is a sub case of the so-called real capital growth as the company receives the financial assets necessary for the capital increase from external sources and not through self-financing3. Through the conversion of liabilities into capital the company shall be exempted from its debts and also, given the increase of its capital, be reinforced in the markets. There are three main methods of converting liabilities/debt to capital4. Firstly the conversion of convertible bonds, which the company has
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Good Essays

    Southern Homecare Cost Of Capital Case

    • 1073 Words
    • 4 Pages

    Southern Homecare Cost Of Capital Case

    In this case, the corporate cost of capital needs to be analyzed and hence, to estimate that, a company’s long-term source of funds (common stock, long-term debts and preferred stock) should be used. Since the corporate cost of capital is used to make decisions today, which will affect the future cash flows, the only acceptable costs are today’s marginal costs that are used. These marginal values are the estimates of the cost of capital that will be raised in future which will provide an accurate estimation of raising the capital in future.…

    • 1073 Words
    • 4 Pages
    Good Essays
    Read More
  • Good Essays

    Cost Accounting Cc2 Unit 2
    • 2988 Words
    • 12 Pages

    Cost Accounting Cc2 Unit 2

    Operating cash flow before working capital changes has largely fluctuated, increasing to a peak in 2006 and falling again. The highest point can be observed in 2008. Finance costs have decreased in 2008 by almost half. Stores and stocks increase at a steady rate but show a spike in 2008. Trade debts reach a peak in 2006 and then fluctuate. Other receivables, however, show an increase. Net cash from operating activities shows a peak in 2006. The greatest addition to plant, property and equipment is witnessed in 2008. Net cash used in investing activities reaches a peak t 2008. Net cash used in financing activities shows an upward trend with a peak in 2008. Cash and cash equivalents show a peak in 2008, with a smaller peak in 2006. *CC5 FIVE-YEAR GROWTH RATES Sales and net-income have increased over the years but the per-share results are different because the number of shares goes up considerably in 2008, reducing per-share values and making growth rates negative. No dividends were paid in the first two years and as a result, the growth in dividends per share has been 100%. Equity per share has shown a growth over the years. Issuing more shares has resulted in lower sales and net income per share. The negative effect is especially felt on net income per share. This is not a good sign for the company, as it will negatively affect share prices financial markets. Financing the expansion in 2008 with a growth in equity seems to have been an unreasonable…

    • 2988 Words
    • 12 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    FIN 571 Week 4 Individual Assignment An
    • 452 Words
    • 2 Pages

    FIN 571 Week 4 Individual Assignment An

    XYZ Company should take benefit of short term and long term prospects and employ these into its financial policies. Most importantly, XYZ Company should make a plan to control its working capital. The working capital is the quantity of cash a business has to run its trade. Proper management of the company’s working capital will benefit the company to meet its financial objective and develop in the future. XYZ Company’s financial statements demonstrate that overhead expenses and selling expenses must be decreased. Though, the net income for XYZ Company has been progressively growing, this is a beneficial indication for the company’s future growth.…

    • 452 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Better Essays

    Acc 561 Financial Statements Differential
    • 910 Words
    • 4 Pages

    Acc 561 Financial Statements Differential

    Financial statements provide documentation of a company’s financial history for a set timeframe. One of the financial statement used by investors, creditors, and mangers is the balance sheet. The second statement used by accountant’s income statement, which is also important to shareholders. The third statement is the retained earnings statement, and the fourth financial statement is the statement of cash flows. Each financial statement has a different purpose and shows different aspects of the company’s finances. However, these financial statements are integrated and work together to provide shareholders financial information. This paper will defines the four financial statements while explaining the financial statement most suitable for either an investor, creditor, or management.…

    • 910 Words
    • 4 Pages
    Better Essays
    Read More
  • Satisfactory Essays

    Homework Week #1
    • 787 Words
    • 4 Pages

    Homework Week #1

    1-2. What does the phrase limited liability mean in a corporate context? Limited liability means that owners/investors are solely liable for the amounts they invested in the company; and owners/investors are not responsible for any debts, delinquent funds, or collections incurred by the company.…

    • 787 Words
    • 4 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    Accounting and Global Piracy
    • 3664 Words
    • 15 Pages

    Accounting and Global Piracy

    These different actions will certainly create costs and expenses for the company that needs to be paid for, and these costs needs to be recorded in the financial statements of the company itself. The dilemma in this case is the method we are going to use to input these numbers into the statement. The numbers can be input into the statement either as an asset in the balance sheet or as an expense in the profit and loss statement. The way that these numbers are input to the statements depend on how actions are taken, the criteria of the actions, future benefits of the actions, and also the period of time the action will take place. These criteria and methods will be discussed in depth in the extent of this paper.…

    • 3664 Words
    • 15 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Carded Graphics, Llc Sheeter Replacement Decision (Solution)
    • 5538 Words
    • 23 Pages

    Carded Graphics, Llc Sheeter Replacement Decision (Solution)

    The calculation of the cash flows is moderately complex. The richness of the case is a function of the carefully articulated context for the decision. Managers are very clear about the strategic…

    • 5538 Words
    • 23 Pages
    Powerful Essays
    Read More
  • Better Essays

    Padgett Paper Products
    • 2445 Words
    • 10 Pages

    Padgett Paper Products

    The company has significant levels of Equity and is not minimizing its financial structure. It is able of taking more debt, but the debt needs to be more properly structured. The D/E ratio during the years increased significantly. In 1993 the D/E ratio was 22% and in 1996 it grew at 67% (Appendix1). Also the Comparison of the total Equity and the total Liabilities show that the share of Equity of…

    • 2445 Words
    • 10 Pages
    Better Essays
    Read More
  • Better Essays

    Working Capital Management in Healthcare
    • 1505 Words
    • 7 Pages

    Working Capital Management in Healthcare

    Working capital is the money required to finance the day to day operations of an organization. Working capital may be required to bridge the gap between buying of stocked items to eventual payment for goods sold on account. Working capital also has to fund the gap when products are on hand but being held in stock. Products in stock are at full cost, effectively they are company cash resources which are out of circulation therefore additional working capital is required to meet this gap which can only be reclaimed when the stocks are sold (and only if these stocks are not replaced) and payment for them is received. Working capital requirements have less to do with profitability and much more to do with cash flow. Within the context of this paper, we will review three current articles that deal with specific issues related to the management of working capital.…

    • 1505 Words
    • 7 Pages
    Better Essays
    Read More
  • Best Essays

    Coke Financial Structure
    • 2217 Words
    • 9 Pages

    Coke Financial Structure

    References: Coca Cola (KO) Stock Research, Equity Ratings, News & Analysis . (2911). Retrieved August 23, 2011, from ValueInvesting 2.0: http://www.wikiwealth.com/research:ko…

    • 2217 Words
    • 9 Pages
    Best Essays
    Read More
  • Satisfactory Essays

    Intermediate Accounting
    • 17122 Words
    • 69 Pages

    Intermediate Accounting

    Topics 1. Convertible debt and preference shares. Warrants and debt. Share options, restricted share. Earnings Per Share (EPS)—terminology. EPS—Determining potentially dilutive securities. EPS—Treasury share method. EPS—Weightedaverage computation. EPS—General objectives. EPS—Comprehensive calculations. EPS—Contingent shares. Convergence issues. Share appreciation rights. 26, 27 16 30, 31 Questions 1, 2, 3, 4, 5, 6, 7, 27 3, 8, 9 1, 10, 11, 12, 13, 14, 15 17, 18, 24 19, 20, 21 Brief Exercises 1, 2, 3 Exercises 1, 2, 3, 4, 5, 6, 7, 25, 26 7, 8, 9, 10, 29 11, 12, 13, 14, 15 1, 2, 3 Problems Concepts for Analysis 1…

    • 17122 Words
    • 69 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    FS ANALYSIS
    • 516 Words
    • 2 Pages

    FS ANALYSIS

    The corporation has an increasing value of cash and cash equivalents and receivables of 5% every year; it means that they have sufficient cash to cover their current liabilities. The sales of the corporation also affects the amount of cash and receivables, since it shows a good performance through other sources such as their service fees, rent income, gain on sale of investments and other income, which contributes to their cash and receivables…

    • 516 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    client letter
    • 527 Words
    • 3 Pages

    client letter

    Although businesses have a lot of means of raising funds to expand their businesses yet the most prevailing is by floating shares of stock to the general public. A company is responsible to paying dividend on share it sells to the real owners of the business as well as income taxes of capital revenues. However, it is clear that any time a company raises capital by taking on a debt; that company can write such debt payments off of its income taxes. We should understand that the tax advantages of debt capital or financing in this case is the primary reason why it is better for viable business-company to raise fund or capital by debt instead of by equity financing.…

    • 527 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    Cadbury Vrio
    • 840 Words
    • 4 Pages

    Cadbury Vrio

    The Debt/Equity ratio of the company is as low as 0.02%. This ratio is negligible and it can be said that it is almost an all equity company. Because of such a capital structure of the company, it gives the signal of a safe investment. The risk associated with the company will be low and hence it will be able to raise additional debt as well as equity with reasonable ease. However, we suggest that the company can take the benefit of financial leverage by raising debt in case of future capital requirements. It is outstanding that the company has huge Reserves and Surplus and hence they can fund projects through Internal Equity.…

    • 840 Words
    • 4 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Finance: Generally Accepted Accounting Principles and Growth Rate
    • 4430 Words
    • 48 Pages

    Finance: Generally Accepted Accounting Principles and Growth Rate

    Spontaneous liabilities are the first source of expansion capital as these accounts increase automatically through normal business operations. Examples of spontaneous liabilities include accounts payable, accrued wages, and accrued taxes. No interest is normally paid on these spontaneous liabilities; however, their amounts are limited due to credit terms, contracts with workers, and tax laws. Therefore, spontaneous liabilities are used to the extent possible, but there is little flexibility in their usage. Note that notes payable, although a current liability account, is not a spontaneous liability since an increase in notes payable requires a specific action between the firm and a creditor. A firm’s profit margin is calculated as net income divided by sales. The higher a firm’s profit margin, the larger the firm’s net income available to support increases in its assets. Consequently, the firm’s need for external financing will be lower. A firm’s payout ratio is calculated as dividends per share divided by earnings per share. The less of its income a company distributes as dividends, the larger its addition to retained earnings. Therefore, the firm’s need for external financing will be lower.…

    • 4430 Words
    • 48 Pages
    Powerful Essays
    Read More

Related Topics