Assignment Sample on Advanced Financial Functions
Introduction
Financial functions are concerned with functions that involve finance and related elements. Offer for sale, and public issues of shares are two very important financial functions. The offer for sale is a method in which promoters in public companies can sell their shares. The public issue of shares is a method in which public companies issue their shares to the public. This essay will involve comparison and contrasting offers for share and public issues of shares. In addition to this invoice discounting and factoring will also be compared and contrasted as they are also important financial functions in an organisation.
a) Compare and contrast an offer for sale and a public issue of shares
Offer for sale is concerned with the method in which promoters of a public company dilute their shares by selling them on the Exchange platform. These shares can be purchased by retail investors, companies, foreign institutional investors as well as qualified institutional buyers. Offer for sale is a method of raising funds by a company and its promoters of the top 200 companies in terms of market capitalisation. On the other hand, the public issue of shares is, concerned with issuing shares by a company to be purchased by the public. Public issue of share can be done through various methods including initial public offering follow on public offers and right issue (Che-Yahya et. al. 2018). The initial public offering is a process that a company can use only once in its lifetime. Follow-on public offers, can be made by a company to raise finance any number of times, and rights issue is a method in which a company makes an offer to raise capital from their existing stakeholders.
Offer for sale is done by a company that, is already listed on the stock exchange whereas, an initial public offering or public issue of share a company that is not listed before listing itself on the stock exchange (Kirca, 2020). In other words of a for sale is a method for public companies whereas an initial public offering is for companies where they become public companies from private companies by listing themselves on the stock exchange.
An offer for sale is a process in which shares of the company are already listed on the stock exchange and are being regularly offered to the public (Krieger, 2020). On the other hand, an initial public offering includes the offering of shares to the public for the first time as the company converts itself from a private company to a public company.
Offer for sale is a method in which promoters sell their shares and dilute their shares, and no new shares are created (Mohd-Rashid et. al. 2018). In contrast to this initial public offering include selling existing as well as creating new shares to be sold to the public.
Offer for sale is a small process as compared to an initial public offering and it can be completed in one trading session. Offer for sale is a small and easy process because the companies are, already listed on the stock exchange. Contrasting to this, initial public offering is a lengthy process because a company is going public from going private and listing itself on a stock exchange which is a lengthy and complicated process.
Offer for sale is a process in which investors are required to pay charges like brokerage and securities transaction text along with other charges that are required to purchase shares in the market (Jain, 2021). In relation to an initial public offering, the investor is, not required to pay any kind of fee.
b) Compare and contrast invoice discounting and factoring
Invoice discounting is concerned with the form of invoice Finance in which businesses sell unpaid invoices to a lender and give the case to the business that as a percentage of the value of the invoice. On the other hand, factoring is a financial transaction in which a type of debtor finances and in exchanges for the finance business sale its accounts receivable or invoices to the third party (Irungu, 2020). For example, A is an organisation that is looking to raise their fund to sell its accounts receivable to B at discount. Be received their account receivable it is responsible for collecting money of accounts receivable.
In factoring the company to home invoices are being sold is responsible for collecting the invoices and accounts receivable. Contrasting to this in invoice discounting the actual business to whom the invoice belongs is responsible for the collection of invoices and accounts receivable.
Factoring involves sales of invoices to third party and the purchaser company control sales ledger and collects the debts where is invoice discounting is an alternative way of drawing money against invoice of the company (Branici, 2020). Business to home invoice belongs admittance control over the administration of sales ledger.
Invoice discounting is an alternative way of raising money using invoices however, the customer who is responsible for paying invoices is not aware of discounting of invoices. Contrary to this, in factoring customer is aware of the fact that invoices have been, sold to another company. It is also the reason that in factoring the third company is responsible for collecting money from invoices.
An invoice discounting facility involves that a business is selling the invoice only to collect funds against an invoice or invoices whilst, in factoring complete rights regarding invoices are assigned to the third party who has purchased invoices (Fabrizio et. al. 2019). It means that in invoices discounting the complete process can be kept confidential by the company when it sells its invoices to raise funds. It is not possible in factoring to keep the process confidential because the third party will be responsible for the collection of funds from invoices from the business to whom the invoice belongs.
Conclusion
Based on the above discussion, it can be said that offer for sale and public issue of shares are two very different ways of raising capital by a business. Similarly, invoice discounting and collecting are also two different processes of raising funds by the company, against its invoices from a third company.
References
Books and Journals
Branici, M. (2020). Online Factoring and Invoice Trading Platforms. Redefining the Future of Commerce Financing Techniques. Analele Stiintifice Ale Universitatii Alexandru Ioan Cuza Din Iasi Stiinte Juridice, 66, 137.
Che-Yahya, M., Abdul-Rahim, R., and Rashid, R. M. (2018). The influence of” offer for sale” by existing shareholders on investors’ reaction in the IPO immediate aftermarket. Business and Economic Horizons (BEH), 14(1232-2019-872), 818-828.
Fabrizio, N., Rossi, E., Martini, A., Anastasovski, D., Cappello, P., Candeago, L. and Lepri, B., (2019). Invoice discounting: a blockchain-based approach. Frontiers in Blockchain, 2, p.13.
Irungu, J. M. (2020). Receivables factoring and performance of private finance companies in Kenya: A case of private finance companies in Nairobi City County (Doctoral dissertation, St. Paul’s University).
Jain, S. (2021). Capital of a Company-Shares and Debentures. Available at SSRN 3894781.
Kirca, I. (2020). Is It Compulsory for Non-Public Joint Stock Companies and Limited Liability Companies to Issue Their Shares at Their Real Value?. Banka Huk. Dergisi, 36, 5.
Krieger, J. L. (2020). Helsinn Healthcare v. Teva Pharmaceuticals and the Evolving On Sale Bar to Patentability. In Chemistry and Patent Law: US Supreme Court Decisions 2000− 2020 (pp. 113-121). American Chemical Society.
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