Methods of Raise Capital Essay Example | Topics and Well Written Essays - 1750 words

Methods of Raise Capital - Essay ExampleBonds argon the best way to work up capital of large companies. Roughly about 25% of the capital comes by bonds. Companies thrum benefit greatly from the issuance of bonds because investors pay a lower interest rate than the rates of other types of borrowing. Also, because the interest pay on bonds is exempted from business taxes. Therefore, companies must make interest payments even if profits do not appear. If in that respect is doubt from investors that the company does not have the capability to meet the obligations of interest, or it could refuse to buy bonds or that the demand for interest rate will be higher to compensate them for their increased risk. (U.S.Department, 2009). One of the most common methods of raising capital is through bonds , where we define bonds are loans made to governments and institutions by investors as the investor get a specific interest rate because he invests his money in good investment idea. In return, the borrower gets the money it needed, overly the investor gets the original amount invested (the principal amount or value of the bond issue) and nominate issue bonds for a long period of up to 20 and 30 years. Bonds are classified jibe to their quality bonds or prospects for reimbursement. Bonds do not usu all toldy find the equal attention, such as uprightness from investors and the media. Since the bonds offer many a(prenominal) advantages better than stock. In addition, safety of bonds is over stocks and more confident. (Mohammed, 2005). There are many companies planning to raise their capital. For example, Lloyds Bank announced that it will raise the banks capital to 7.5 billion pounds, through the swap of bonds. (Glover, 2009). The bond market can be divided into three parts Domestic bonds Shall be handled through the local currency and it is issued by domestic borrowers. Foreign bonds Shall be handled by the local currency and is also trading in the domestic market e xcept issued from foreign borrower and always common on the well-rounded follow-up of power. Eurobonds Eurobonds is underwriting by multinational banks and these bonds are not taken by the trading in all markets and specific national or local markets, these bonds are currently has role in the production of most of the major currencies and some small currencies.There are many types of bonds are offered in the market. These bonds can be dividing it as followsStraight bonds Can be called fixed-income securities as they have a fixed price and are paid on time. Bonds paid in part These bonds the same straight bonds, but there is a difference that the investor must pay a certain portion of the capital from 0 to 33 on the closing date and paid the remaining of the capital after 6 months.Zero-coupon bondThese bonds also the same straight bonds, but the difference is that it does not have a fixed time for the payment of benefits, but there is a problem in high-value discounts and must pay the original amou