Methods of raising capital

Methods of raising capital include issue of such securities as debentures, preference shares, accumulative preference shares, ordinary shares and deferred shares.

A debenture is a loan made to a company. It is by law secured against the assets of the firm. So, the firm must always be in a position to repay debenture capital to debenture holders. It is possible if the company buys properties and other assets which are readily convertible to cash. Debentures pay a fixed rate of interest and are really loans to companies. They are a very secure method of investment. Debenture holders are not allowed to vote at shareholders’ meetings and play no part in the ownership and control of the company.

The preference share is the first type of share to be paid after the debenture and pays a fixed rate of interest.

Most preference shares are accumulative. This means that if a company is unable to pay preference shareholders in the current year then it may pay any money it owes on an accumulative basis and add it to the next year’s dividend.

Ordinary shares sometimes referred to as equities are the main shares of the company. They carry with them ownership and voting rights at ordinary shareholders’ meetings. The more ordinary shares the person holds, the greater is his share of ownership of the business.

If the company makes only a small profit then the dividend declared will probably be low and the ordinary shareholder will receive a very small dividend, but if the dividend is high the ordinary shareholder does well. If the firm goes bankrupt the ordinary shareholder will probably lose the whole of his investment. Thus the ordinary shareholder carries the major of the risks of the firm.

Most companies declare their dividends twice a year at six-monthly intervals.

Vocabulary:

issue - 1.выпуск (ценных бумаг) 2. v выпускать
debenture n - облигация
preference share - привилегированная акция
accumulative share кумулятивная акция
ordinary share обыкновенная акция
deferred share - акция с отсроченной выплатой дивиденда
secure - 1.гарантировать, обеспечивать 2. надежный, безопасный
to be in a position (to) - быть в состоянии (сделать что-либо)
convertible a - обратимый
cash n - наличные деньги
mortgage debenture- долговое обязательство, обеспеченное заложенной недвижимостью
rate of interest - ставка процента
vote v - голосовать
shareholders’ meeting - собрание акционеров
current a - текущий
owe v - быть должным (кому-либо)
dividend n - дивиденд
equity - доля акционера в капитале предприятия
declare v - объявить
bankrupt n - банкрот
to go bankrupt - обанкротиться
 Insert prepositions:
1. Capital may be raised ___ borrowing ___ friends and relatives. 2.  The private limited company is limited ___ its ability to expand. 3. Shares are offered ___ sale ___ members of the public. 4. A debenture is a loan made ___ a company. 5. Some assets are easily convertible ___ cash. 6. Dividends are usually declared ___ six-monthly intervals.