Question

Write notes on the following ;Sources of Finance and Financing Arrangements

Stock Markets

How stock exchanges work

Raising equity capital

What is equity capital

Preference shares

Some unusual types of shares floating on the main market

Methods of issue (Reference Glen Arnold and Deborah lewis ) (100 marks with references. 15 pages)

Answer 1

A. Stock markets are markets where securities which has already been issued are traded regularly and share prices of their shares are fairly discovered using twin factors of demand and supply.

B. Stock exchanges work on the principle of demand and supply and when a large amount of investors who are willing to buy and large amount of investors who are willing to sell they are encountering each other regularly than the fair price of the shares are discovered.

C. Raising equity capital is through issuance of of share for the first time and rights issue as well which will be helpful in generation of capital.

D.equity capital is the capital which belongs to the equity shareholders and it will give them the right to vote in the company and they are also given with the rights of ownership.

E. Preference shares are the shares which are a mix of equity and debt and they are provided with limited right to vote and fixed dividend.

F. Some unusual type of share floating are private placement and other exotic options which can be used for funding of these shares.