Capital Budgeting Process Assignment Example | Topics and Well Written Essays - 1000 words

Capital Budgeting Process - Assignment good exampleThe foremost reason for going public is to raise additional capital by air shares to the usual investing public. This means other funding sources such as internally generated profits or pay through bank loans had been considered and set aside in favor of an IPO. Owners of private companies will now assume to contend with the fact that they will lose some control by the issuance of new shares provided they have other compensation in return for doing it such as new funds for working out (new products and new markets), increased liquidity for the current shareholders by creating an active market for the stock to trade and budge hands, the stock itself can become a valuable currency to fund new acquisitions (some mergers are make using company stock instead of cash payment), increase employee motivation through stock options to enshroud good performance and in general enhance a companys reputation via a well-executed IPO run fr om start to end. Preparations are make long before the actual IPO itself and it involves three main participants the issuing firm, the underwriter and the public. The initial public offering can become a difficult and contentious final result if not handled properly because of the conflicting claims and interests of the three main parties mentioned. An important factor that determines if an IPO is successful is illuminate timing. As they say, timing is everything, from setting an ideal price range that maximizes the funds that will be generated to the markets reception of the offering. If a decision had been made to go through with the IPO, there are two considerations to be made regarding correct timing firstly is the stage of the firms development.