Question

Write a note on “Capital fund”.

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Answer 1

In other words, the excess of assets over the liabilities for a profit earning organisation is termed as capital and the same for an NPO is termed as capital fund. Any surplus or deficit ascertained from Income and Expenditure account is added to (deducted from) the capital fund. It is also termed as Accumulated Fund.

Capital funding is the money that lenders and equity holders provide to a business for daily and long-term needs. A company's capital funding consists of both debt (bonds) and equity (stock). The business uses this money for operating capital.

Answer 2

• Capital funding is the money that lenders and equity holders provide to a business for daily and long-term needs. A company's capital funding consists of both debt (bonds) and equity (stock). The business uses this money for operating capital. The bond and equity holders expect to earn a return on their investment in the form of interest, dividends, and stock appreciation.
• To acquire capital or fixed assets, such as land, buildings, and machinery, businesses usually raise funds through capital funding programs to purchase these assets. There are two primary routes a business can take to access funding: raising capital through stock issuance and raising capital through debt.
• A company can issue common stock through an initial public offering (IPO) or by issuing additional shares into the capital markets. Either way, the money that is provided by investors that purchase the shares is used to fund capital initiatives. In return for providing capital, investors demand a return on their investment (ROI) which is a cost of equity to a business. The return on investment can usually be provided to stock investors by paying dividends or by effectively managing the company’s resources so as to increase the value of the shares held by these investors.
• One drawback for this source of capital funding is that issuing additional funds in the markets dilutes the holdings of existing shareholders as their proportional ownership and voting influence within the company will be reduced.
• Capital funding can also be acquired by issuing corporate bonds to retail and institutional investors. When companies issue bonds, they are in effect, borrowing from investors who are compensated with semi-annual coupon payments until the bond matures. The coupon rate on a bond represents the cost of debt to the issuing company.
• Capital funding can also be acquired by issuing corporate bonds to retail and institutional investors. When companies issue bonds, they are in effect, borrowing from investors who are compensated with semi-annual coupon payments until the bond matures. The coupon rate on a bond represents the cost of debt to the issuing company.In addition, bond investors may be able to purchase a bond at a discount, and the face value of the bond will be repaid when it matures. For example, an investor who purchases a bond for $910 will receive a payment of $1,000 when the bond matures.