Meme
8 Comments
3 months ago
b. Give four treasons for issuing shares at a, Discount, Premium
At a Discount
To attract investors when demand for shares is low: Investors are more willing to subscribe when
shares are offered below nominal value
+ To raise capital quickly during financial difficulties: A company in urgent need of funds may offer shares at a discount to ensure full subscription.
To improve the marketability of shares: Discounted shares may be easier to sell, especially for a company with a weak reputation or uncertain prospects.
To encourage investment in a newly established or struggling company: Investors may require a discount as compensation for the higher risk involved.
At Premium
Strong company reputation and profitability. Investors are willing to pay more than the nominal value because of confidence in the company's performance.
To raise additional capital without issuing more shares: The premium provides extra funds while
avoiding excessive dilution of ownership
c. State and explain four permitted uses of shares premium
Issuing Fully Paid Bonus Shares
Writing Off Preliminary Expenses
Writing Off Expenses, Commission or Discount on issue of Shares/Debentures
Providing Premium Payable on Redemption of Preference Shares or Debentures
+ Issuing Fully Paid Bonus Shares
The company may capitalize the share premium and use it to issue bonus shares to existing shareholders free of charge. Eg A company may convert N1,000,000 in share premium into 100,000 bonus shares of N10 each.
+ Writing Off Preliminary Expenses
Preliminary expenses incurred during the formation of the company can be written off against the share premium account. Eg Registration fees, Legal expenses for incorporation, Cost of preparing the Memorandum and Articles of Association
Writing Off Expenses, Commission or Discount on issue of Shares/Debentures
The share premium account may be used to eliminate expenses incurred in raising capital. E.g
Underwriting commission, Brokerage fees
Providing Premium Payable on Redemption of Preference Shares or Debentures
Where a company redeems preference shares or debentures at a premium, the premium payable can be charged to the share premium account eg If N500,000 preference shares are redeemed at 105% the premium of M25.000 may be paid from the share premium account
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3 months ago
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3 months ago
but naturally, this is a finance research and should have elements of secondary data. Are you able to get real, true secondary data to lend some credibility to this research? if so let me know so we can see what data we can have access to and how we can incorporate it into this study
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4 months ago