Businesses issue stock or equity for a number of purposes, including to finance expansion or pay off debt. We'll examine the numerous terminologies used in the process of issuing stock to raise money in this post.

Share Capital

All money raised by a business in return for regular or preferred stock shares are referred to as share capital. A company's equity funding or share capital may fluctuate over time. If a business needs to raise more funds, it can get permission to issue and sell more shares, which will boost its share capital.

Only the initial sale of shares by the business to investors can raise share capital. It excludes the sale of shares that have already been issued on a secondary market.

Authorized Share Capital

The maximum share capital that a corporation is permitted to raise is known as Authorized Share Capital. This cap is stated in the company's constitutional documents, and it may only be adjusted with the shareholders' consent. A publicly traded firm must identify a particular cap on the amount of share capital it is authorised to raise before it can sell stock.

Typically, a corporation does not issue all of its authorised share capital. Instead, the corporation will keep some in reserve for potential use in the future. A company's equity funding or share capital may fluctuate over time. A business that wants to generate more capital might get permission to issue and sell more shares, which would increase its share capital.

Issued Share Capital

The value of all the shares a corporation decides to sell is the issued share capital. Alternatively put, a corporation may decide to merely issue a fraction of the total share capital with the intention of issuing additional shares in the future. The par value of the issued capital cannot be greater than the amount of the permitted capital, nor are all of these shares required to be sold immediately. The term "paid share capital" refers to the whole par value of the company's issued shares. When referring to share capital, this is typically what is meant. The amount of shares of stock that a firm offers to investors to purchase is known as its issued share capital.

Paid-Up Capital

The sum of money that shareholders have given a corporation in exchange for shares of its stock is known as paid-up capital. When a business sells its shares to investors directly on the primary market, it generates paid-up capital. Because it is capital that was not borrowed, paid-up capital is significant. A completely paid-up corporation has sold all of its shares and cannot raise capital without borrowing money by taking on debt. Authorized share capital may never exceed paid-up capital. In other words, the authorised share capital serves as a cap on the maximum amount of paid-up capital that could be raised.

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