Case Study Business Report (answering question) Essay

Case Study Business Report (answering question) - Essay Example The company’s capital is divided into units with definite values and each of these units is referred to as a share. The people who hold this shares are called the shareholders. The major traits of shares is that they are the capital units for a company and each of them has a face value that is clear-cut. Certificates are issued to their holders for indicating the shares they hold against their values. All shares have unique numbers and their values indicate the significance of an investor in a company along with the degree of their liability (Melicher & Norton, 2010). These shares can be transferred from one person to another. There are several types of shares that a company can issue and these are the equity and preference shares. The preference shareholders receive dividends at a fixed rate and also receive their capital in case the company is winding up. They are quite a safe investment since their holders receive dividends regularly. On the other hand, the holders of equit y shares receive their dividends only after the preference holders have been paid . They also do not receive dividend that is fixed. Their receiving of dividends depends on the profitability of the company. Their initial investments are only refunded once the preference share owners have been paid theirs (Droms & Wright, 2010). ... This implies that if the company makes losses the management has no obligation to pay the owners their dividends. However, shares have disadvantages to their owners since the owners of equity are only paid their dividends when there are profits. The prices of the equity shares are not constant and vary with the company’s profitability. The company could raise a lot of money in the process of raising shares and this results in the shares having low values. The holders of the equity shares experience high degrees of threats and only own the company by name. The company has the disadvantage in that it cannot trade on the equity shares. The swaying of the owners of equity when voting for leaders by the management can lead to conflicting interests between them (Droms & Wright, 2010). 2. Debentures This is the money that a company borrows for a long period of time and pledges to repay within a constant period. The companies issues certificates to the providers of this loans known as debentures. It is given under the ordinary seal of an organization. It can be described as an acknowledgment that is put in writing for the amounts borrowed. It provides the conditions and terms on the money borrowed, their interest rates, repayment periods along with the securities offered (Rundell, 2008). The debenture holders are considered as creditors to the organization and are repaid after a constant time period. Their owners do not have the rights of voting and these amounts are normally secured. There are two types of these debentures which are the redeemable and irredeemable debentures along with the convertible and nonconvertible debentures. The redeemable ones are only repaid upon maturity