Нет.The management of company’s capital

To operate the business successfully, the manager needs to make decisions that maximize the returns to the owners of the company. Such decisions range from buying supplies from high-quality, low-cost suppliers, to hiring the best available workers, to investing in the best available projects. This is connected with the management of company's capital, Let’s see difference between the terms capital and equity.

Equity is the current net value оf the company including, but not restricted to, the nominal value of the shares in issue.

Then in an extreme case — bankruptcy — the owner's equity will be repaid only after everyone else, including employees, creditors, banks, etc., has received what they are owed.

On the other hand, in successful times, the owners have а claim on all the net profit of the company.

In the UK а public company raises its capital by inviting the public to take up shares. And smaller companies can sell shares to the investing public without going to the expense of obtaining а full share listing on the main Stock Exchange. The unlisted securities market has the advantage of allowing the company to гаке money from outside investors without losing much control of the company.

Sometimes we can see the situation when а company gains а listing on the Stock Exchange

This will provide the long-term opportunity of raising capital by issuing fresh shares. However, at least 25 % of the equity must be in public hands — thereby reducing the control of the original owners.

When а company is said to be "high geared", the level of borrowing is high when compared to its ordinary share capital. А lowly-geared company has borrowings which are relatively low. High gearing has the effect of increasing а company's profitability when the company's trading is expanding; if it slows down, then the high interest charges associated with gearing will increase the rate of slowdown.

We can distinguish between permanent and temporary working capital. The former keeps the business flowing throughout the year, while the latter is needed from time to time to take account of seasoned, cyclical or unexpected fluctuations in the business. The temporary working capital is usually serviced from an overdraft facility. If inventories are not well managed there will be an enormous amount of excess working capital. This is the job of financial manager to minimize the stocks of raw materials, the level of the work in progress and the quantity of finished goods.

His task is also to see that generous credit terms are negotiated with suppliers but minimal credit is offered to customers.

The expected cash flows that will result from potential investment projects should be measured carefully.

11. A private company. The structure of the authorised capital. Risk of a take-over.

A private company can be formed by two or more people. They sign a Memorandum of Association, stating the number of shares they agree to take, their signature is followed by a signature of another shareholder.

In a private company there cannot be more than 50 members, or shareholders. Each share carries a vote at the shareholders’ meeting.

The authorised capital consists of market value of all the shares issued.

If any person owns 51 per cent of the shares he would have a controlling interest, & would be in a good position to take over the firm. Person owning a large proportion of the shares could ask to join the Board.

H&G is a private company. The balance of power was upset after Ambrose Harper’s death. Wentworths, a large & successful firm, owining 10 per cent of H&G shares, had an opportunity of baying some of the shares belonging to Harper. If Wentworths owned 51 per cent of the shares they would be in a good position to take over H&G, making it a fully owned subsidiary.

Grant & Peter’s mother owned 20 % of the capital each & 50% after AH’s death came to form a trust (40%) & to his sister Caroline (10%). Caroline had got a very generous offer to her shares from the Wentworths. She couldn’t sell her shares without offering them first to the other shareholders.

Hector Grant was personally jealous of Alfred Wentworth & didn’t want him to own the controlling interest of the shares. He raised a personal short-term loan so that to postpone the possibility of a take-over by baying 250 shares (5%) in the company.

+ Private company: Raisung and granting loans (Harper & Grant LTD overcomes the risk of a take-over and ensures the favourable redistribution of the share capital).

Harper & Grant Ltd was a private company. So Caroline( Ambrose’s sister) can’t sell her shares without offering them first to the others shareholders. Peter advised HG to make an offer. But they hadn’t enough money to buy these shares. HG went to mr. Brewer to ask him to give a credit. At first the bank’s manager didn’t want to lend 25 000 pounds and HG had to threaten him. After it mr. Brewer offered to raise a second mortgage on the HG’s property. If the Head Office agreed, HG could have a straight loan and pay 2% above yhe bank rate, so the rate of interest would be about 9%. It was a short term loan of three years.

After Harper’s death Peter Wiles wanted John Martin on the board. John wasn’t sure, because Alfred Wentworth has been asked to join the Board now that he owns more shares. But Peter said that the Rules of Association state the qualification holding is only two shares. He wanted to put John in the picture and the next move was to get him made a director. At the Board Meeting Peter proposed John to be asked to join the Board. Nobody was against it and HG entrusted William Buckhurst to draft suiteble minutes about this proposal.