Fixed and floating charges Essay Example | Topics and Well Written Essays - 2000 words

Fixed and undirected charges - Essay ExampleHowever, on the new(prenominal) hand, companies often tend to offer such collaterals in order to gain relaxations in obtaining debt including reduction in the interest rates as well as margin requirements. Thus providing a aegis not only has a legal implication but also offer influence to creditors in controlling the future events. However, from the perspective of a level, the nature and impact of providing assets of the firm as security place different significance and as such depends largely upon the credit worthiness of the firm. Better a firm has a creditworthiness chances be that the firm ordain be able to get larger concessions in providing assets as security.2It is stock-still critical to note that from legal perspectives, the claim or charge of creditors on the assets of the company are created through different charges created over the assets of the firm with relevant regulatory authorities. These charges can be of either floating nature or of fixed nature depending upon the nature of the mutual agreement between both the parties. It is however also important to understand that the significance of floating and fixed charge to both creditors and the firm whitethorn be different again depending upon the nature of agreement made between both the parties.There are generally two sources of specie for an organization i.e. equity contribution made by the shareholders of the firm and the funds acquired from external sources such as bank loans and bond issues. Equity issues or equity contribution is the just about risky investment because it is clean i.e. shareholders are offered no guarantee or security that their investment will be paid back and as such shareholders have the least claims against the assets of the company in moorage of its liquidation because all the claims of companys creditors are settled first and remaining is distributed to the shareholders.On the other hand, debts obtained from vari ous sources such as banks and capital markets are less risky as compared to