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Types Of Equity And Debt Instruments

Question
  1. You are a financial analyst for a large financial institution. Your employer is in the business of lending or investing in a range of companies particularly start-up companies looking for funds. You have been asked to prepare a paper on the benefits of investing in start-up companies either by way of debt or equity. REQUIRED: Discuss the different types of equity and debt instruments that are available in the market place that can be used as a form of investment in a start up company.
  2. The concept of a company being a separate legal entity is a myth and has no relevance in today’s commercial world. Certain people take advantage of this concept to deprive creditors of access to funds. A common practice is the establishment of phoenix companies. Discuss whether you agree with this concept and what you would recommend to make the system fairer to creditors.
  3. The legal obligations imposed on directors are not onerous enough. Directors should be under a higher duty of care. Recent cases involving breaches by duties demonstrate that the Corporations Act is not strong enough to punish directors. Discuss whether you agree with this statement or whether you think directors in Australia should face a heavier duty than currently exists.
  4. How does Australian Corporations law protect stakeholders other than shareholders (for example, employees and unsecured creditors)? Are these protections adequate? Discuss this in the light of the recent corporate collapses. Compare this to the rules in your own country, if not Australia.
Solution

Title: Types Of Equity And Debt Instruments
Length: 8 pages (2116 Words)
Style: Havard

Preview

Types of Equity and Debt instruments

Equity instruments 

Equity instruments refer to the business documents that are utilized as legally binding, thus can comfortably be enforced by the evidence that a business owner have the right to possession and ownership of all the business pursuits being run by a firm. Ordinarily, equity instruments are declared by the start-up company to the willing investors who finance various projects initiated by the company. There are multiple documents used today as equity instruments. These documents include share or stock certificate, warrants, equity shares, preference shares and stock (Weiss 2009).

 When a start-up company joins an agreement with a financial institution so as to be funded via equity, they have to be completely aware that part of the ownership of the start-up will be taken over by the financial institution. Legally, these investors are permitted to have some level of control on how the start -up business will be run so that they can have a return on the amount they invest. Generally, start- up ventures can declare stocks as shares to the speculating shareholders. Therefore, the more the number of shares that a financial institution gains from the start-up company, the greater the level of possession of the firm; hence, the financial institution exercises greater decisive power and influence in the day to day operations of the company (Parameswaran et al.2011).

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