The paper "London Tech Holdings PLC Finances" is a perfect example of a finance and accounting case study. There are many sources of financing through which London Tech Holdings PLC may secure funding for its various projects. In other words, the type of financing to be used will largely depend on the nature of the project being financed as well as the ability of the company to repay. The following sources of financing are available for the company; Raising finance through the stock market. This may be through a rights issue to the existing shareholders in a bid to raise finance from them without diluting their ownership.
On the other hand, the company may decide to issue new shares for instance by listing in the stock market for the first time. The number of shares to be issued will depend on the company’ s financial needs. The types of shares issued may be of two types including ordinary shares and preference shares. The main advantage/implication of equity financing is that it will not have to be repaid while the risks and liabilities of company ownership are shared with the new shareholders (Dyson, 2007).
Since there are no payments, the cash flow generated will be used to further grow the business. However, the ownership of the company is diluted. The decision making authority is also shared. Loan/Debt – the company may finance its activities and projects by securing long-term debts from financial institutions such as banks in which the company would have to pay interest. Other forms of debt financing that the company may use include debentures. In most circumstances, the company will be required to have security for the debt financing it acquires.
The implication of debt financing is that the company will be able to undertake the intended project before it has the necessary funds. In addition, the debt in question would be paid in installments while the company ownership remains intact as well as the decision making authority. However, the debt attracts interest that must be repaid together with the principal. The inability to pay exposes the company to the threat of takeover which is not healthy for the company.
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