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

Fixed and floating charges - Essay ExampleHowever, on the other hand, companies often feed to offer such collaterals in order to gain relaxations in obtaining debt including reduction in the interest rates as well as margin requirements. so providing a certificate not only has a legal implication but also offer influence to creditors in controlling the future events. However, from the sentiment of a firm, the nature and impact of providing assets of the firm as security carry different significance and as such depends largely upon the credit worthiness of the firm. check a firm has a creditworthiness chances are that the firm will be able to get larger concessions in providing assets as security.2It is however critical to celebrate that from legal perspectives, the claim or charge of creditors on the assets of the troupe are created through different charges created over the assets of the firm with relevant regulatory authorities. These charges can be of either floating nature o r of fixed nature depending upon the nature of the mutual agreement between two the parties. It is however also important to apprehend that the significance of floating and fixed charge to both creditors and the firm may be different again depending upon the nature of agreement made between both the parties.There are generally two sources of funds 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 most 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 case 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 various sources such as banks and capital markets are less risky as compared to