Week 13 - Raising Capital

Question 1

Who can be seen as investors in a company?

Answer 1

Shareholders and lenders

Question 2

Capital may be raised in two ways - what is the first?

Answer 2

Company issuing shares (share capital); buyers become company members with an interest in how the company fares

Question 3

Capital may be raised in two ways - what is the second?

Answer 3

By obtaining loans (loan capital); debenture holders do not become members of the company, but may secure the loan with a charge

Question 4

Shareholders don’t usually expect to have an…

Answer 4

Active role in the company - they don’t want to be involved in the day to day management of the firm

Question 5

Once capital has been raised through the sale of shares, where does it go?

Answer 5

It is kept in a dedicated account - there as a reserve incase the company need it in times of difficulty

Question 6

Where loans are made to a company, what are they often given?

Answer 6

A fixed or floating charge - a guarantee they will get their investment back

Question 7

Which are seen as longer term investment - shares or loans?

Answer 7

Loans are long term investment