Hello! 1. Enterprise financing methods
Enterprise financing methods refer to the form in which the enterprise obtains funds, that is, the specific form in which the enterprise obtains funds. The sustainable operation and continuous expansion of an enterprise must first take financing activities as a prerequisite, and financing activities are also an important part of enterprise operating activities. The choice of an enterprise's financing method directly affects the enterprise's capital structure, the enterprise's business model and the choice of major business decisions. Therefore, enterprises must choose an appropriate financing method based on the actual situation. The ways for enterprises to raise funds can generally be divided into two categories: financing from within the enterprise and financing from outside the enterprise. Among them, the financing from within the enterprise mainly refers to the accumulation of interests formed during the daily production and operation process of the enterprise while maintaining the original business scale, that is, the retained earnings part; while the financing channels from outside the enterprise are extensive, as follows: < /p>
(1) Equity Financing
Equity financing refers to raising funds by issuing stocks, which is a very important means of financing in corporate economic operations. As a kind of equity certificate that the holder has corresponding rights to the enterprise, stocks on the one hand represent the shareholder's claim to the enterprise's net assets; on the other hand, ordinary shareholders rely on the shares they own and the total number of shares authorized to exercise power. , have the right to exercise their corresponding rights to control or participate in the production, operation, management and decision-making of the enterprise.
1. Advantages of raising funds by issuing shares. First, the funds raised do not need to be repaid, are permanent, and can be occupied for a long time; second, generally speaking, the amount of funds raised in this way is relatively large at one time, and the restrictions on use are relatively loose; third, it is related to the issuance of bonds. Compared with other methods, the financing risk of issuing stocks is relatively small, and there is generally no fixed dividend payment burden. At the same time, because this method reduces the company's asset-liability ratio, it provides protection for creditors and is conducive to strengthening the issuing company. Fourth, raising funds in this way is conducive to improving the company's visibility. At the same time, compared with unlisted companies in aspects such as management and information disclosure, the general requirements are more standardized, which is conducive to helping them establish norms. modern enterprise system.
2. Insufficient stock financing. The main manifestations are: first, the preliminary work of issuing stocks is relatively complicated and the issuance costs are relatively high; second, because the risks borne by the investment are relatively large, the expected returns required are also relatively high, and the dividends are paid after tax. There is no tax deduction effect, so the capital cost of stock financing is relatively high; third, stock financing may add new shareholders, thus affecting the original major shareholders' controlling rights in the company; fourth, if the stock is listed, the company must also comply with relevant laws and regulations Disclosing relevant information may even expose business secrets, resulting in higher information disclosure costs.
(2) Absorbing direct investment
Absorbing direct investment refers to the company’s agreement in the form of agreements and other forms, in accordance with the principle of “*** mutual investment, *** risks, and *** benefits " is an equity financing method that attracts investment from other units and individuals. Countries, legal persons, individuals, including foreign investors, can make direct investments in the form of cash assets, physical assets, industrial property rights, land use, etc. my country's "Company Law" stipulates: If shareholders make capital contributions in kind, industrial property rights, non-patented technology or land use rights, they must conduct a valuation evaluation, verify the property, and must not overestimate or underestimate the valuation, and handle the transfer procedures of their property rights in accordance with the law. 1. Advantages of absorbing direct investment: As a method of equity financing, absorbing direct investment also has the advantages that the capital raised in stock financing does not need to be repaid, the financing risks and financial risks are relatively small, there is no fixed dividend payment burden, and it is conducive to reducing The company's asset-liability ratio and increased subsequent borrowing capacity are among the advantages. In addition, this method can directly obtain the advanced technology and equipment required for production and operation, which will also help the company to form production capabilities as soon as possible. Because of this, my country has always maintained a high level of inequality in absorbing foreign direct investment.
According to the United Nations Conference on Trade and Development's "World Investment Report 2003", China was the country that absorbed the most foreign direct investment in the world in 2003, with an amount of US$53.5 billion.
2. Inadequate absorption of direct investment. The main disadvantages of absorbing direct investment are the high cost of capital and the need to bring generous returns to owners. At the same time, because this financing method does not use securities as a medium, property rights relationships are sometimes unclear and inconvenient for property rights transactions.
It is easy for investors to get capital in but difficult to get out, it is difficult to absorb a large amount of social capital participation, and the scale of financing is limited.
(3) Bond Financing
Bonds are securities issued by economic entities in accordance with legal procedures to raise funds and agree to repay principal and interest within a certain period of time. It is a written document indicating the relationship between creditors and claims. Bonds issued by enterprises are generally called corporate bonds or corporate bonds, which can be divided into non-convertible bonds and convertible bonds.
Non-convertible bonds are bonds that cannot be converted into shares of the issuing company. Most bonds are of this type. As an important financing method and financial instrument, non-convertible bonds have the following characteristics: repayment, liquidity, safety, and profitability.
Convertible bonds refer to bonds that bondholders can convert into shares of the issuing company at a specified price. A convertible bond is a special type of corporate bond that can be converted into shares of common stock at a specific time and under specific conditions. Convertible bonds have characteristics of both bonds and stocks.
For investors, the biggest advantage of convertible bonds is their selectivity, that is, they can choose to hold the bonds until maturity and receive interest income; they can sell the bonds in the secondary market and obtain the price difference; or Can be converted into shares. If the stock price falls, investors can choose to repay the principal and interest at maturity. The feature can help investors avoid losses caused by the stock price falling. When the stock market rises, investors can choose to convert shares to obtain the benefits brought by the rising stock price. For the issuer, a lower coupon rate on a convertible bond can reduce financial expenses.
1. Advantages of bond financing
First, the cost of capital is low. Compared with stock dividends, bond interest is allowed to be paid before income tax, and the company can enjoy tax benefits. Therefore, the company's actual bond cost is generally lower than the stock cost.
The second is financial leverage. No matter how much profit the issuing company makes, bond holders generally only receive fixed interest. If the company earns a lot of money after using capital, and the increased income is greater than the amount of debt interest paid, it will increase shareholder wealth and company value.
The third is to protect the company’s control. Bond holders generally do not have the right to participate in the management decisions of the issuing company, so issuing bonds generally does not decentralize the company's control.
2. Insufficient bond financing. The issuance of corporate bonds has relatively strict requirements for the enterprise itself, and the approval and issuance procedures are relatively complicated. The funds raised from the issuance of corporate bonds must be used for purposes approved by the approval authority and must not be used for other purposes. To cover losses and non-production expenses. Listed companies must also have certain basic conditions for issuing convertible bonds, such as: financial statements have been audited by certified public accountants with unqualified opinions; they have been profitable for the past three consecutive years, and they are engaged in general industries with a net asset profit rate of more than 10%, and they are engaged in energy, raw materials, and infrastructure. The company requires more than 7%; after the issuance of this bond
the asset-liability ratio must be less than 70%; the interest rate must not exceed the bank deposit interest rate for the same period; the issuance quota must be more than 100 million yuan; other regulations of the China Securities Regulatory Commission. In addition, the issuance of corporate bonds puts a certain amount of financial pressure on enterprises because they must pay interest on time. This makes the risk of this financing channel relatively high.
(4) Financial leasing financing
Financial leasing refers to a leasing transaction in which the lessor uses funds to provide the lessee with the necessary equipment and has the dual functions of financing and financing. It mainly Involves the lessor, lessee and supplier, and consists of two or more contracts. The lessor shall enter into a purchase contract with the supplier and a lease contract with the lessee based on the lessee's needs and choices, and lease the purchased equipment to the lessee for a period of not less than two years. During the lease period, the lessee shall pay rent in installments to the lessor in accordance with the provisions of the contract. The ownership of the leased equipment belongs to the lessor, and the lessee shall have the right to use the equipment during the lease period.