the differences between share capital and loan capital. And the similarities.

the differences between share capital and loan capital.
And the similarities.

Question Posted / gracie

2 Answers
41108 Views
I also Faced
E-Mail Answers

Answers were Sorted based on User's Feedback

the differences between share capital and loan capital. And the similarities...

loan capital

Part of a firm's capital employed that is
(1) raised from bank or finance company as long-term loans &
from debt-equity investors in the form of debentures or
preferred stock
(2) it earns a fixed rate of interest instead of dividends, and
(3) must be repaid within a specified period, irrespective
of the firm's financial position.

Also called borrowed capital.

Share Capital

Part of a firm's capital employed that is
1)raised by issuing shares in return for cash or other
considerations.
2)It earns dividends
3)It needs to be repaid only at the time of company's
dissolution.
4)Share capital can be composed of both common and preferred
shares.

Also known as "equity financing".

Is This Answer Correct ?

39 Yes

3 No

the differences between share capital and loan capital. And the similarities...

Answer / ameet narayankhedkar

Share Capital:
it can be composed of both common/ordinary and preferred
shares, funds are raised by issuing these shares in return
for cash or other assets. it is equity financing, the
company pays dividends to share holders at certain
percentage if she is able to pay due to good financial
position. here share holders are one of the owners of the
company.
Loan Capital:
it is short term or long term liabilities, which has end
date and annul interest payments funds are raised by issuing
for example debentures against these funds company has to
pay the amount of the interest annually to debenture holders
and principle amount at maturity date.
Here they are not the owner of the company but the
creditors.
Conclusion funds raised through share capital is the equity
finance it is the owner ship share of share holders in the
company and dividend is paid.
Funds raised thru loan capital creates liabilities to
company and annul interest is paid to its creditors