Evaluate the Long Term Financing of Stemlife Company

Evaluate the long term financing of Stemlife Company Stemlife Companys capital structure is made up of 100% equity. It has both types of equities; ordinary stocks and retaining earning. Stemlife issues two types of stocks; stocks capital and stocks premium. There are some(prenominal) advantages of offering common stocks. First, by issuing common stocks the confederation washbowl raise a large sum of funds (Anonymous, etd). Secondly, the board of directors can decide on the amount of dividend nonrecreational to the stockholders (Anonymous, etd). Thirdly, the caller-out needs not pay the stockholders if it is not doing strong (Anonymous, 2006). The companionship also does not have a due date date to repay the fund (Anonymous, 2006). There is also little restriction to follow in issuing stocks. On upper side of that, stockholders also pump in part of their dividend (unappropriated profit) into the company for investing and business expansion. This increases Stemlifes financial resources. There are several(prenominal) advantages of reinvesting profit by stockholder into the company (Anonymous, etd.). First, the company can avoid payment of cash and issuance of cost (Anonymous, etd.). Secondly, the alive management can maintain its control over the company (Anonymous, etd.).

The amount of retained earning put in by Stemlife increases from social class 2006 to year 2007. A company needs to have ripe(p) fundamentals in order to attract investors to invest in its stock. A strong balance sheet plays an important part as it speaks on behalf of the company about its financial status. A financially fit company will have more than equity than debt (Loth, 2010). Capitals are a companys ageless funding to support its expansion and assets. The capitalization ratio compares the center debt with the total equity (Loth, 2010). Stemlife has a capitalization ratio of 9.75% in year 2006. This low percentage of capitalization ratio indicates that the company has a healthy equity cushion which means it has decent equity to back up its liabilities.... If you want to get a full essay, order it on our website: Orderessay

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