financing means equity owner, own funds and financing. Usually it works on a small scale, such as the operation of the partnership and individual property owner by the financial trough of their own. Joint stock companies operating on the basis of the shares, but different management from shareholders and investors
merits of financial shares:
The following facts in the field of investment:
(i) permanent in nature: equity financing is of a permanent nature. There is no need to pay for the liquidation did not occur. Still once sold in the market shares. If any share holder wants to sell those shares, which can be done on the stock exchange where the company is listed. However, this does not pose any problem of liquidity of the company
(b) solvency: shares to increase the solvency of the company funding. It also helps to increase the financial situation. In times of need and it can raise capital by inviting offers from the public to subscribe for new shares. This will enable the company to succeed in the face of the financial crisis
(c) the creditworthiness: financial high equity increases creditworthiness. A business where equity financing has a high rate could easily take a loan from the banks. In contrast to those companies that fall under a large debt burden, no longer it remains attractive to investors. Means a higher proportion of stock that will be needed less money to pay interest on loans and financing expenses, and a lot of the profits will be distributed among the shareholders
(d) does not benefit :. does not pay interest on any intruder in the case of equity financing. This increases the net income of the company which can be used to expand the scope of operations
(V) motivation: As in the stock financing for profit stays with the owner, so give him the motivation to work more hard. The sense of inspiration and take care of the largest in the business, which are funded from the same owner funds. This keeps the man conscious and active business to look for opportunities to earn profit
(vi) is not at risk of insolvency: There is also no capital borrower so it should be no payment of any strict lime agenda. This makes the project owner free of financial worries and there is no risk of insolvency
(VII) Filter: in the case of the liquidation or dissolution of the lack of strangers charge on the assets of the work. All assets remain with the owner
(viii) capital increase: joint-stock companies can increase each of the issued and authorized capital after some legal conditions are met. Even in times of funding can be raised through the sale of the need for additional shares
(IX) macro-level advantages: equity financing has many advantages and social macro level produces. First, it reduces the interest elements in the economy. This makes people's financial woes and panic tree. Second, the growth of joint-stock companies allows for a large number of people to participate in the profits without taking an active role in management. Thus, people can use their savings to earn cash rewards over a long period of time
disadvantages financial stocks:
The following defects in the field of investment:
[1945003 (i) decrease in working capital: and if most of the money from businessmen invested in fixed assets and businesses may feel a lack of working capital. This problem is common in small companies. His has a fixed amount of capital to start with and consumes a large proportion of it in terms of fixed assets. So it remains less to cover the running costs of the company. In business on a large scale, it can be financial mismanagement also lead to similar problems
(b) difficulties in making payments regularly: in the case of finance stocks businessman may feel the problems in paying payments of regular and frequent nature. Sales revenue may fall in some cases as a result of seasonal factors. If sufficient funds are not available then there will be difficulties in meeting short-term obligations
(c) the imposition of higher taxes: and has no interest in paying any intruder taxable income and it's labor is the largest. This leads to higher tax rates. Moreover there are double taxation in some cases. In the case of joint-stock company is the tax on the whole income before the imposition of any adoption. When you pay dividends and therefore taxed again from the income of recipients
(d) limited expansion: given to shareholders in the financing, the rights are not able to increase the size of operations. Business expansion needs huge funding for a new factory and pick up more markets. Tables of small companies also do not have any professional guidance available to them to expand their markets. There is a general trend that the owners try to keep their business in such a limit so they can keep control of the emotional over it. Business is also funded by the owner himself so he is very obsessed with a lot of fraud and embezzlement opportunities. These factors hinder the expansion of business
(v) the lack of research and development: in a business that is run only on the field of investment, and there is a lack of research and development. Research activities take time and require huge financing to gain access to a new product or design. These research activities are undoubtedly expensive but in the end when it is turned on its results in the market, rose a huge revenue. But the problem arises that if the owner uses its own capital to finance such research projects in the long term, then he will be facing a problem to meet short-term obligations. This factor does not encourage investment in research projects funded by equity business
(vi) the delay in the Replace with: companies that operate on the stock financing, encounter problems when you update or replace equipment, DC when wear out . The owner is trying to use existing equipment for as long as possible. Sometimes it may even ignore the deterioration of the quality of production and maintain the operation of the old equipment.
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