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Loan versus Share Capital from the company's perspective, share capital represents a less "onerous" way of raising capital. The company is only liable to pay dividend payments when it can afford to do so. In addition, any such payments usually only equate to 2 - 3% of the market value of the equity per annum. In the case of loan capital, the company would be liable for repayment of the capital and interest at regular set intervals at a rate close to the current prime rate.
To the investor on the other hand, share capital usually also represents the preferred option, provided the dividend yield and capital growth (increase in the share price) exceeds any income which would have been received had the capital sum been loaned out instead. This is typically the case with most JSE listed companies.
So share capital is clearly the preferred option for raising capital from both the investor and the company's perspective.
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What is the difference between share capital and bank loan?
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What is nominal share capital?
Nominal share capital is like an authorized share capital. The share capital that the company allowed (the maximum amount) to issue as registered capital when the company is incorporated. It can be changed later by the approval of the shareholders.
What are the various types of preference share?
1.cumulative preference share capital 2.non cumulative preference share capital 3.participative preference share capital 4.non participative preference share capital
What do you meant by prefernce share capital?
Preference share capital means share capital which have preference over all other kind of share capital in term of profit and clearance at the time of dissolution of business.
What is ordinary share capital?
Ordinary share capital is that type of share capital which receives share in profit in last or after all other third parties liabilities as well as preference share holders.
