The website has the complete lesson note for all the subjects in secondary school but this piece showcases the SS2 Commerce Lesson Note on Sources of Capital. You can use the website search button to filter out the subject of interest to you.
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TOPIC: LIMITED COMPANIES
Content: 1. Sources of capital
- Advantages and disadvantages of limited Liability Companies
SUB-TOPIC 1: SOURCES OF CAPITAL
The following are sources of capital open to limited liability companies.
- Loans and Overdraft: These can be obtained from the bank by the company to finance their operations
- Retained earnings or plough back profit – the profit made by the company can be set aside for re-investment.
- Credit purchase – Raw material can be purchased by the company on credit.
- Hire – purchase: companies can be granted hire purchase facility by the seller to acquire some of their assets.
- Equipment leasing – companies can lease some of their equipment from a given leaser and make payment through rental payment through rental payment.
- Sales of shares – public limited liability companies can raise capital by issuing shares to the public through the stock exchange
- Sale of debenture: – these are long – term loans obtained form the general public at a fixed interest
- Bill of Exchange – this is a document duly signed by debtors bank to the creditors and the creditor cashes the money with some documents.
Shares
A share can be defined as the unit portion of the company’s capital owned by a shareholder. It is a unit which a shareholder has in a company.
Classes of shares
There are basically two types of shares namely
- Preference shares and
- Ordinary shares
Preference shares
These are shares whose dividends are paid first and have a fixed rate of dividend. They include cumulative, participating redeemable, non-cumulative, non-participating and convertible preference shares.
Features of Preference shares
- They have no voting right
- They have a fixed rate of interest
- Holders receive dividend before others
- They are entitled to return of capital first at winding-up
Preference shares are of many types which include
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