Accounting -- Financing a Start Up Company Term Paper

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Accounting -- financing a start up company with either stocks or bonds?

When seeking financing for a new company, two potential ways of financing the company are to issue stocks to shareholders that desire an interest in the fate of the company, or to sell bonds to individuals who wish to make money off of the interest of such bonds. Common stock options mean that the individuals who buy such stock become shareholders in the new company. Shareholders, as partial owners, have a right to vote for the company's board of directors. Such stockholders have an interest in the profits made by the company because they share in profits in proportion to the number of shares they own.

Of course, a new company could sell a large proportion of stock to finance its operations -- but individuals might not want to take such a risk, as if the company does not turn a profit, the money they make on their initial investment will not be returned.

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Also, from the point-of-view of the individuals who are starting the company, the founders might not wish to immediately cede so much internal control of a new and innovative company to ordinary shareholders who do not understand the company's evolving mission and direction.

Bonds are another way to generate revenue. Many different types of bonds exist for a company to sell -- however, a bond, unlike a stock, does not mean that the owner….....

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