Financial Accounting assignment Speech or Presentation

Financial Accounting assignment - Speech or Presentation Example payment of dividend to the preference shareholders is under the discretion of the board of directors of a company, whereas the interest payment for debentures is not under their control. Interests on debentures are tax deductible whereas dividend payments are not. In the case of a company going insolvent, debentures get preference over the preference shares (Harvard, 2009). A stock exchange placing will enable the company to raise the additional funds very rapidly. However the company has to also satisfy the demands of the common shareholders and a number of changes have to be brought in terms of the management and policies. There is also a possibility of another company placing a bid to acquire the company through the stock exchange. A stock exchange placing can also act an effective marketing for the company, as the more people will become aware of the business (Hobson, 2007). A rights issue is offered to all exiting shareholders, as opposed to stock exchange placing where the stocks are open to common public. The shares are issued based on a ratio, for instance, every share qualifies to buy another four shares, for a specified period of time. The shareholders can either accept or reject the offering. There is a possibility that the required capital may not be raised, as the shareholders may not accept the offering. However, the company does not run the risk of adding more shareholders and also taking the risk of mergers and acquisitions (Hobson, 2007 and Keef, 1992). The additional capital required can also be raised by not paying the dividends to the shareholders for the financial year. The main advantage of this method is that there are no additional costs involved in raising capital. However, it is to be noted that the shareholders may not be happy with this decision and it might have a negative effect on the potential investors (Frankfurter, Wood and Wansley, 2003). The net present value is computed by discounting the future savings to present values at