Raising Finance

Question 1

Authorised and Issued Capital

Answer 1

Authorised - Max Allowed
Issued - Max Currently Issued

Question 2

Share Premium

Answer 2

When a share is issued for more than the nominal value, the share premium is the difference between values

Question 3

Companies can do 3 things with profit

Answer 3

-Dividends for shareholders
-Retain for future internal investment
-Make a bonus issue of new shares for existing shareholders

Question 4

Can share premiums be used to pay dividends?

Answer 4

Never, but it can be used to create bonus shares.

Question 5

Bonus Issues are…

Answer 5

Extra shares issued to existing shareholders as a reward, usually paid for by the share premium.

Question 6

Rights Issues

Answer 6

Are a method of raising funds for a company. They are bonus issues except the shareholders pay for them themselves.

Question 7

Preference Shares are…

Answer 7

Shares with no voting rights which:
- have a fixed dividend each year as long as profits allow
- have priority over equity shares in the allocation of profits

Question 8

Venture Capital

Answer 8

Is a form of external investment for small businesses which are too big to self-finance but too small to enter the stock exchange.