Types of Capital, Part-2 💸💸💸💸💸💰💰💰💰💰

                                            

In the previous post, we have learned about the procedure of a company going for an IPO. Now let us learn about different types of Capital.

Authorized Capital
So, taking the example of our boutique, if it is going for an IPO, then it has to get registered with SEBI. The total amount of money which is required for a boutique to get registered with SEBI. In other words, Authorized Capital is the maximum amount of money (Capital) a boutique(Company) can raise shares.
Issued Capital
This is a capital which is issued to the shareholders.
Subscribed Capital:
This a capital which has been given to the subscribed users of the shares.
Let me quote an example here. Suppose, if our boutique has ensued 100 shares, there might be 50 people who are interested to buy those shares and they try to put an application to hold the share.
 Out of 50, only 30 might purchase those shares. So, here, the 50 people are subjected to Subscribed capital and the 30 are subjected to the issued capital.
Called up Capital:
Some people who keep an application to hold the shares might not pay the complete amount (issued capital) to get the ownership of the shares. Such type of a capital is known as called up Capital.
Paid up Capital
This capital is earned by the boutique when a company sells its shares in the market.
It is the amount which is received by the company when the shares are sold away to the shareholders

                                                      

In a nutshell, a capital either it is a shareholders or company’s board members will be written on a balance sheet. The specialty of a shareholder capital is that a common man like you and me can become an owner of a company if he/she holds shares of a particular company.
Debt is an important element of a balance sheet. Isn’t it? So, how a debt is managed and what actually a debt is? Will be told in the coming articles
•    My next posts will explain about short-term debts and long-term debts and the difference between the liabilities and debts.

Until then,
Have a great time. 😊😊😊😊
Sneha Polapragada 💓💓💓💓

Types of Capital- Part 1 💸💸💸💸💰💰💰💰💰💰

Capital is a very important element for any business. As mentioned in the previous article, different types of companies come into picture when a company goes public through the initial public offering.

Top reasons for a company to become an IPO are
*Maximizing market share
*Increase popularity
*Increase Company's worth
*Gaining profits
                              
Initial Public Offering is a procedure in which an unlisted company will get a right to trade its shares in a Primary Market. It means that an unlisted company will get listed either on National Stock Exchange or Bombay Stock Exchange (Trading with respect to India).
So, the procedure for IPO (Initial a Public Offering) is regulated by SEBI (Security Exchange Board of India) Consider the example of the boutique as we did earlier.
                                        
So, if the boutique wanted to go public, it should have a turnover of at least Rs.3 crore rupees.
SEBI basically looks into certain prerequisites when a company has to go IPO. Let me brief you in four easy steps about the procedure of an IPO.
Number 1
The boutique must select an investment bank to see if the company is worth going public and start trading its shares to people. The investment bank will basically act as an underwriter.
•    Underwriters are said to be intermediates who work with the (SEBI) issuing body to decide the price of the securities(Shares)
Number 2
The boutique must submit the certificate of registration and commencement certificate to SEBI as a verification. The SEBI will go for a background check of the boutique. In the meanwhile, the company will prepare a prospectus.
•    A prospectus is a financial document which is submitted as a security to SEBI. It will determine the potential of the buyer and the value of a share.
Number 3
Once the prospectus is ready, the boutique will start declaring that it is going public. The boutique’s growth potential is also mentioned. Once the SEBI is fine with the registration certificate, then it will approve the boutique to go public and will fix the share prices.
Number 4
The prices of the shares will be fixed and finally, the boutique will get listed on Stock exchange (either NSE or BSE with respect to Indian trading)
People tend to buy the shares through DEMAT accounts and these accounts are managed by the investment bankers.
•    DEMAT account is an account which allows the people (investors who purchase shares) to hold the shares in an electronic form.
This is how a company will become public in general.
Now, where did this different types of capital come from? How are these Different Capitals used in an organization?  Will be explained in my next post

Until then,
Have a great time. 😊😊😊😊
Sneha Polapragada 💓💓💓💓

What is capital?

As mentioned in the first article about the balance sheet, I have invested Rs.5 lac rupees to start the boutique business where Rs.2,50,00 is invested on my own and remaining amount was borrowed from my uncle with an interest of 2% every month. The amount which is invested was been used for various expenses.

The amount which has been invested on my own is said to be owner’s equity or capital and the remaining amount is said to be a liability.
The capital is categorized into five types
1.    Authorized capital
2.    Issued capital
3.    Subscribed capital
4.    Called-Up capital and
5.    Paid-Up Capital

These capitals come into picture when a company becomes public which means it goes for an initial public offering by issuing shares to the public.
A company will become public to raise more funds and also to expand in all parts of the world.
The procedure of a company becoming public and about types of capital will be explained in next article.

Until then,
Have a great time 😊😊😊😊😊
Sneha Polapragada.