The probable ways are:
LOANS– These are the short- term loans that a company acquires in order to raise capital and it is acquired via keeping the assets of the company as security but the creditors do not become the co-owners of the company.
Hindrances-
- That they tend to increase the debt of the company and the profits may be diverged resulting into then the ultimate option would be to spend the dividends of the company in order to pay these loans which gradually increase up due to the interests added along.
- High interest rate and are not very flexible in nature.
DEBENTURES– These are referred as long-term loans by which the company may issue capital. These debentures maybe secured against the assets of the company or unsecured, or maybe redeemable etc. The debenture holders are not the owners of the company and such type of means is used only when the company does not mind issuing the debt and does not want to dilute the shareholdings of the company.
Hindrances-
- It shows a bad picture of the company by lowering the profits and increasing the debt of the company.
- It puts heavy burden on the company as each company has its own limit of borrowing
PREFERNCE SHARES– The preference share investors are given preference over other investors of the company. They have characteristics of both equity and debt. There is no legal obligation for payment of dividend, tend to improve the borrowing capacity and no charge on assets of the company. And also, there is no dilution in control.
Hindrances-
- These investors do not enjoy the same voting rights as that of the other investors of the company and are preferred.
- It is costly source of raising capital
- Skipping the payment of debt may have bad reputation on the company’s profile.
EQUITY SHARES– The holders of these shares are the real owners of the company as they have control over the functioning of the company
Hindrances-
- The company cannot take advantage of issuing on equity even if equity shares are issued.
- It is irredeemable.
- They can manage on their own and tend to be an obstacle for the management of the company.
Aishwarya Says:
I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.
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