DB2 - Sponge Bob Needs Money - 8. LA - Mexico Accounting Finance Essay

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DB 2- Long-Term Capital investment for Sponge Bob Company
Companies invest vast amounts of capital by making decisions that will earn substantial profits in the future. The decision to expand their businesses to raise long-term money and still boost their liquidity is not easy to make (Demaria & Sandra 939). Therefore, Sponge Bob Square Pants Recording Company must make the right decisions concerning their expansion plans. There are several markets that the company can venture to raise long-term capital while not depleting their cash reserves. One of the ways of making this possible is through investing in equity capital. This will allow the company to sell and buy shares of the company stock since it wants to raise more capital on a long-term basis (Demaria & Sandra 941). These can be either preferred or common shares. Ordinary shares will allow shareholders to vote, and in the event of liquidation, other creditors and shareholders will be considered first. Sponge Bob Company can also opt for preferred shares where payment of a specified dividend is guaranteed. The main benefit of raising equity capital is that the Sponge Bob will not be required to repay shareholder investment.
Furthermore, Sponge Bob should also consider debt financing, which will allow them to borrow money and repay within the agreed period. The most common types of debt financing include loans and bonds (Demaria & Sandra 946). These two are the most appropriate ones for Sponge Bob since they intend to expand their music production business. Additionally, Sponge Bob should consider markets that will reduce their risk. Therefore, they will ...