Describe the types of corporate shares and compare the use of shares to bonds and debentures in financing a corporation
Order Instructions:
describe the types of corporates shares and compare the use of shares to bonds and debentures in financing a corporation
SAMPLE ANSWER
Types of corporate shares
Introduction
Shares represent ownership rights to a company while debentures and bonds refer to long term debt instruments that are used by a company to borrow money from the public or private firms mostly at a certain interest rate which is fixed. There are two main types of shares, ordinary shares and preferential shares. Ordinary shares have voting rights and they participate on the sharing of profits in a company. However, they have no guarantee on the profits of the company. Preferred stock has a guarantee on profits and the shares are redeemable at the option of the holder. They have the first right to the assets of the company in case the company goes bankrupt before the ordinary shareholders are paid however they have no voting rights (Chandra, 2007)
Debentures and bonds have no voting rights in the company’s general meetings and they are freely transferable. They are entitled to a fixed rate of interest that is guaranteed.
There are certain types of bonds that can be converted to equity shares. Convertible bonds or debentures can be converted to equity shares at the option of the holders after the lapsed of a stated period of time. The feature of Convertibility in bonds is a way that’s meant to attract the customers to the product by promising ownership rights to the company in future. The other ordinary bonds or debentures are non-convertible debentures or bonds and they cannot be converted to equity shares but they mostly carry higher rates of interest than the convertible ones.
Ordinary shares can be issued according to different classes. Some classes can have different number of voting rights per share. For example class A ordinary shares can have one vote per share while class B have two votes per share.
References
Chandra, G. (2007) Company Law, 3rd Edition; McGraw-Hill Education
We can write this or a similar paper for you! Simply fill the order form!
