Securities Issuance: Raising Finances for Business Operations

Securities issuance is the process offering securities to the investors for the business organization to raise finances to cater for its daily operations. The securities issued by the firms to the general public may be bonds or stocks that the potential investors buy and the organization raises the required fund (Dworaczyk,2019). The security issuance in a business organization may take different forms. For example, an organization may have a new security issue where the company releases security to the public for the first time or a seasoned issue where an established firm provides additional in the market. When the managers of the companies are issuing securities, they usually announce to the public.

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The purpose of the company making the announcement on the security offering to the public is to provide the potential investors with the necessary material information about the firm, its investment opportunity and its principles that will enable a reasonable investor to make a correct investment decision (Shtybel,2019). The investors then carefully evaluate the value of the security which usually depends on the performance of the firm that is issuing it and the market assessment of the organization prospect. The firms create a disclosure security document that outlines the type of investors it hopes to invest in their securities. Therefore, the organization offers a clear description of its business, financial results and the business background in the company management.

Another importance of the company announcing the security offering t investors is to provide protection both to the firm, its officers and directors' possible lawsuit in future that may result from the dissatisfaction of some investors who might claim misrepresentation of adequate information concerning the operation of the firm offering shares. It is therefore essential to clear disclosure of information on the firms' securities to prevent the possible legal arguments over the securities offered to the potential investors.

The securities are at a price below the par value as it is not being issued for the first time and thus t is not a standard bond. Therefore, the security is priced at 99.75% as it is not being traded for the first time and thus it is traded at a discount. The security is priced at a less price than its par price in the market. The security is priced at a value below its par value to attract the investors since they will pay less for the security rate lower than the prevailing rates. They are attracted to purchase the securities.In the sale of securities crude oil and gas are recorded in the supplemental section of the company financial statement. this is because oil and gasses reserves are estimated quantities of crude oil with a 90% degree of certainty and most companies believe that they exist in a specific locality that can be extracted. The oil while still underground is not considered as an asset until when it is extracted from the ground. The companies that deal with the extraction of the gases and oil values their reserves by calculating their net present value after subtracting the extraction cost. The accounting methods used in recording the cost that is incurred in the exploration of the oil and gasses determines the method that shall be used. The successful effort in accounting the cost incurred in the drilling process is only capitalized when the well is successfully drilled. Full cost accounting capitalizes all the cost that is incurred in the exploration process.

The crude and gasses recording in the sale of security will result in future interest expenses as the firm may borrow capital to cater to the expenses that are incurred in the exploration. interest expense is a non-operating expense recorded on the income statement. The firm that involved in the extracting and development of crude oil and gasses uses either the full cost method or the. These two methods affect how its net income and cash flow are recorded as the successful effort allows the firms to capitalize on the expenses associated with successfully natural gasses and new oil reserves. On the other hand, full cost allows the organization that is involved in the exploration process to capitalize on all operating expenses that are involved in locating oil and gas reserves. The cost involved in extraction has a direct bearing on the profitability of the firm.

The sale of a security is a long term debt often issued by a large business organization such as manufacturing companies. The securities usually pay interests semiannually at a fixed rate until the maturity of the security. If the security interest rate is lower than the market rate when the securities are offered and the securities are sold at a discount that is at a price less than the face value of a security. If the security interest rate is higher than the market rate the security is being offered the security is sold at a premium that is the price that is the higher par value of the security. The sale of security can result in the risks that may result in investors not to invest in some organizations. The risks associated with interest rates directly affect the value of the fixed income of securities.

References.

. Hoffman, J., & Dworaczyk, J. (2019). SEC approves amendments to the NYSE's substantial stockholder issuance rule and 20 percent rule for shareholder approval of certain private offerings. Journal of Investment Compliance.

Shtybel, U. (2019). A new era of private securities: Application of Blockchain in private capital markets infrastructure. Journal of Digital Banking, 4(2), 152-160.