What is the nature of share capital and its financial effects?

Answer 1

For any business ,capital is essential.Capital is mainly owned funds.In the case of companies,capital is mobilised by issueing shares and the amount so collected is called share capital.The larger share capital means stronger financial position and ability to withstand risk.Share capital gives income in the form of dividends(when in profit).It is also called equity.More share capital,more capcity to borrow(debt).A debt equity ratio 2.5 is ideal.Basil Committee has stipulated capital adequacy norms for Banks.There is no capital adeqacy norms laid down for manufacturing concerns.