corporation and the source of funds of the corporation

We are in a economic booming world in which many corporations involving it , but many people ask their selves , what corporation is and the source of funds which corporation may establish to operate or even expand an existing one .

Meaning Definition of corporation:
Corporation my refers legal entity the has been incorporate either directly through legislation or registration process established by the law. Corporation my exist both for profit and nonprofit business.
There are many famous companies which are exist in the form of corporation and some of them are as follows.

McDonald’s corporation
Masco Corporation
Microsoft Corporation
Samsung Corporation
These are the world’s popular companies which are exist in the form of corporation , and you my familiar all of them but the question is what are the sources of these companies or in other words how these companies are establish or allow to operate the existing ones.

What are the sources of funds of corporations?
Source
Cambridge dictionary defined source the place something comes from or start at , or the cause of something . So in the following section we will explain where a corporation comes from to exist and also to continue father the existing ones their operations.

Source of funds.
Equity

Corporation my raise funds through issuance of shares, these shares my be common stock or preferred stock, or sometimes corporation use their equity created through profitable operation of the business, which is refers Retained Earnings.

1.Common stock
When the corporation raise funds from people who are interesting to be the shareholders of this company although they are limited numbers .

2.Preferred stock
Preferred shares are share issued by a company to its directors / members, they are call preferred shareholders because in case of liquidation, they are given preference in payments.

3.Retained Earnings
Retained Earnings represent the owners’ equity through profitable operation of business.

4.Debt ( borrowing)
Companies my raise loan from the banks in order to finance their projects.
To illustrate how capital structure of a corporation will be let us take one example.

Financing
Equity Contribution:
Management Investment $25,000.00

Total Equity financing $25,000.00
_________

Banks and Lenders:
Banks and lenders $100,000.00

Total Financing: _________
125,000.00

We will explain latter articles more about corporation, such as how corporation are formed, what are the processes followed for the registration of the corporation , types of corporations, characteristics of corporations and many more ….

Publisher: sulaiman isse

Share this post