Subject : Introduction to Business Semester : BBA-1st By - Hijratullah Tahir

1. Capital of Company
Hijratullah Tahir
hijrat.hrm@gmail.com
794 303333

2. Capital Definition
• Capital- Money invested in a business to
purchase assets
• Capital is one of the basic factors of production
along with land and labor
• Capital used to generate income for the
business
• May be Debt capital or Equity Capital

3. Capital in Corporation
• Initial public offering (IPO):
– For the first time
– When company sells its new shares to the public
– Also called Primary market.
• Capital:
– Investment made by public in the company
– Through purchasing shares of the company
– There are Various types of capital, to be
discussed in the upcoming slides

4. Types of Capital:
1. Authorized or registered capital
2. Issued and unissued capital
3. Subscribed Capital
4. Paid up Capital

5. Types of Capital …..
1. Authorized or registered capital:
– The amount of capital which a company can
issue.
– Also called authorized capital because the
company has this much authority to issue
capital
– This amount of capital is registered with the
registrar of the company.
– Therefore it is also known as registered capital.

6. Types of Capital …..
2. Issued and unissued capital:
• A company issue capital according to its
requirements.
• The amount capital which the company
offers out of its authorized capital to the
public for investment is known as issued
capital
• Unissued capital is that capital which is not
issued.

7. Types of Capital …
3. Subscribed Capital:
– Amount of capital for which the people
subscribe (Contribute) is known as subscribed
capital.
– It is part of authorized capital which is issued
and are offered for public subscription.
– Types of Subscribed Capital
• Over subscription:
• Under subscription:

8. Types of Capital …
3. Over Subscribed Capital
– demand for an IPO of Shares exceeds the total number
of shares issue
– In early 2012, analysts indicated that the Facebook IPO;
• IPO was about $10.6 billion by selling more than 337 million
shares at $28 to $35 per share
• In order to take advantage of the oversubscribed IPO and fulfill
investor demand,
• Facebook offered not only more shares (421 million versus 337
million) to investors but also raised the price range for its shares
to $34 to $38 per share

9. Types of Capital …
B. Under Subscribed Capital:
– Demand for an initial public offering of securities is less
than the number of shares issued.
– Also called “under booking”

10. Types of Capital
• 4. Paid up Capital:
– The capital for which the company accepts
subscription and make the delivery of shares to
the applicants
– Amount of money a company has received
from shareholders through shares.
– Paid-up capital is only created when a company
sells its shares on the primary market directly to
investors

11. Classes of Shares

12. Classes of Shares
• The capital of a corporation has been divided
into small pieces into units known as shares.
• Share:
• Instrument used by the company to get funds from
markets.
• The holders of shares are known as shareholders.
• They get dividend as a reward for the investment
made by the people who purchase shares.

13. Types of Shares
There are three types Shares;
1. Ordinary shares:
2. Preferred shares:
3. Deferred shares:

14. Ordinary Shares:
• Also Called equity shares.
• The holders of ordinary shares are the real owners
of a company.
• The ordinary shareholders have voting rights.
• They receive dividend from the profit of the
company.
• The equity share capital cannot be redeemed or
exchange during the life time of the company.
• Also called Common Shares

15. Preferred Shares:
• As the name suggests have some preferences as
compare to other shares
• Main Preferences are as following;
– Preference in dividend payment:
– Preferences in repayments of capital

16. Deferred Shares:
• Deferred shares are also known as founder’s
shares.
• They issued to the promoters of the company and
• The dividend on these shares are paid to them
after all the dividends of all shareholders are paid.