The paper "Corporate Accounting" is a wonderful example of an assignment on finance and accounting. There are two ways of raising finances that’ s debt and equity forms of financing. In order to choose an appropriate method of financing the company must consider the reasons behind the need to finance, the market’ s reaction to the type of financing, and the amount of time available to raise the funds. Equity financing: They are ways of raising finances internally and includes the following methods Issuance of new shares: this is the offering of shares to the public either for the first time if the company is going public or subsequently if the company is already listed.
The shares can either be ordinary shares or preference shares. The ordinary shares are those that are offered to the original shareholders of the company while preference shares are offered to the rest of the public; the owners of such are prioritized over the ordinary shareholders in case of bankruptcy but only after the creditors have been paid. The shares are advertised to the public, and they are sold either by an offer for sale or offer for subscription.
Offer for sale, all the shares are sold to one single investor who acts as the broker and sells the shares to the public on behalf of the company. Offer for subscription, here all the shares are sold to the directly to the public by the issuing company. There are no intermediaries as in the offer for sale, and the price is determined in advance or by tender where the price is the highest bid. Issuing of the ordinary share as a source of financing to the company is more advantageous since shares are readily available for issues and there is no requirement to be complied such as credit rating to issue them.
However, issuing ordinary shares dissolves the shareholding capacity. Rights issue: This involves the issuance of fully paid additional shares to already existing shareholders at prices that are relatively lower than the market price. The main objective of this issue is to raise additional capital in the form of shares. Bonus issue/script issue: This is the issuance of bonus shares to already existing shareholders, and the new share amounts are credited to their share accounts, this is done to raise additional finance and to improve the liquidity of the company. Retained earnings: This is a situation where the company instead of issuing cash dividends to the shareholders retains them in the company in order to maintain liquidity. Advantages of equity financing There no extra charges involved such as interests from bank loans. Investors are usually interested to give additional funding to follow our business activities. The entire funding is usually committed to the intended projects Investors have personal interests in the use of the fund just like the company owners. Disadvantages of equity finance May be expensive to raise in terms of money and time. There will come with it a dilution of power due to the issue of new shares Involves tough regulatory measures when raising such finances There will be revealing of company information to potential investors which may be risky to the business. Debt financing It’ s the raising of finance through borrowing from a lender with a promise to pay back in the future.
The methods include: Bank loans: The Company obtains financing through loans from a bank and other financing institutions, with the intention of paying back later plus interest.
A loan can either be short term payable within one year or long-term payable after ten years. Debt securities Are financial instruments where the issuer pays the buyers of the security at a later date the initial amount plus interest on a specified future date. Examples of debt securities include bonds that are payable after a year, medium-term notes which are payable after 30 years, and commercial papers which are bonds that are payable in a year. Advantages of debt financing The company power is not diluted because the lender doesn’ t have a claim in the equity. Raising of debt finance is less complicated as there aren’ t so many compliance requirements. Disadvantages of equity financing The company will always be required to pledge its assets hence risky It increases the debt-equity ratio of the company hence the company is riskier in the opinion of other lenders It involves other expenses such as interests on loans. Part B ADVANCED SURGICAL DESIGN AND MANUFACTURE LIMITED (ASDM LTD) Nature of business Advanced Surgical Design and Manufacture limited (ASDM LTD) is an Australian based company that trades under Australian stock exchange.
The company’ s corporate headquarters is located in St Leonards, Sidney where the operations and manufacturing facility is also located. Due to its strong commitment to research, development, and engineering the company has won very many awards and an extensive product portfolio. The scope of its duties ranges from the manufacture, design, and engineering of medical instruments which includes prosthetic implant tools. The main vision of ASDM is to provide the best possible healthcare solutions all around the world and at the same time make use of innovative and creative Australian clinicians. Since its listing in 2007, the ordinary shares of the company have been listed under the symbol AMT.
The major products of the company include orthopedic, spinal products, medical services, and consulting services. The orthopedic products include active total knee replacement, Arthur surface, small bone innovations, Inc (Sbi), supplementary surgical products, carpal plate, clavicle plate (CFS), clavicle pain, hip, and knee system instrument sets and polishing technology. The company offers medical services such as; manufacturing of medical instruments where clients are encouraged to reach the company in order to arrange for the planning of projects.
The other medical service offered is precision manufacturing where clients are also encouraged to order. Located in New South Wales, the company’ s wide coverage area allows it to hold a lot of facilities which includes computer numerical controlled machines which allow the company to produce many types and varieties of plastic and metal equipment. With the help of computer-aided design software, the company is able to produce complex 3-dimensional models. In the adhering of safety measures, the company involves the use of finite analysis software which is used to measure stress in the design of materials.
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