Capital Stock And Stock Financing

Looking for capital stock refers to individuals searching for the amount of stock a company is authorized to issue

. Only corporations, businesses with charters that indicate it as a separate legal entity with separate liabilities, are able to issue capital stock.

Corporations issue capital stock to shareholders, individuals who purchase shares of the company and thereby become an owner of the company. Corporations use these funds to finance start-up and operating expenses that are common to any type of business. The value of corporation's stock relies on the company's profitability, which is usually measured on the stock market. Individuals may sell their stocks at almost any time in order to obtain a large profit. Shareholders also receive dividends, or profits, from the corporation at certain times. Dividends are paid per share; therefore, the more shares owned by an individual, the more dividends he or she will receive.

There are two classes of capital stock: common and preferred. Shareholders with common stock, also called ordinary stock, have the ability to attend corporate meetings to decide on financial and other decisions by vote. However, common stock dividends are usually only paid after preferred stock dividends. Shareholders with preferred stock forfeit their ability to vote on business decisions, but, in case of bankruptcy, they are paid before individuals with common stock. Preferred stock shareholders also enjoy fixed dividend payments that are paid before common stock dividends, which are not fixed.

Businesses looking for stock financing are usually referring to stock loans, which allow a business to sell its shares of a corporation for immediate capital. Stock loans are also known as securities loans. A security can be shares, bonds or any other financial asset. There are also marketable securities, such as commercial paper and treasury bills, which are easily convertible into cash.

There are many online stock loan providers that allow individuals to borrow up to eighty percent against their shares without having to sell them. Common requirements for a stock loan are financial documents and proof of ownership of the shares being borrowed against. Most applications are available online, and approval can take as little as five days.

Stock financing also refers to short-term loans that are secured by a business's inventory. This inventory can be in stock, in transit, or in the process of being bought or sold. This type of stock financing works like a cash advance, and must be paid off within two to three months. The amount of financing depends on what the business's inventory is worth, but most lenders can provide fifty to seventy-five percent of the value of the inventory. These lenders also make it possible to secure additional financing without providing additional collateral or changing the management or operation of the goods. Stock financing can also offer discounts for purchasing large quantities of goods.

by: Brian Jones

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