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WEEK 2
SUBJECT: COMMERCE
CLASS: SS 2
TOPIC: LIMITED COMPANIES
Content:
- 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 from the general public at a fixed interest
- Bill of Exchange – this is a document duly signed by debtor’s 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
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