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The share capital is putting those who risk money in a corporation (the entrepreneurs). They own profit, so are supposed to believe in the growth potential of an economic model. So bet "small", is to show doubts until paper header or the imprint of
the website where the company still appears the amount of capital.Economic reality: they are the capital resources to grow the business
During the creation of the enterprise, the provision (we say "liberation") of the capital gives the company the resources to buy the starting heritage. These assets may consist of cash, paid into the bank account of the company or of holdings means (machinery, inventory, licenses, ...) provided by the person or persons who subscribe to the capital. More capital value, the more wealth available to the company for the initiation of its activity is important.
During the creation of the enterprise, the provision (we say "liberation") of the capital gives the company the resources to buy the starting heritage. These assets may consist of cash, paid into the bank account of the company or of holdings means (machinery, inventory, licenses, ...) provided by the person or persons who subscribe to the capital. More capital value, the more wealth available to the company for the initiation of its activity is important.
The rest is pretty simple: small ways, small developing so small profits; even being virtuous, and reallocating profit retention, equity may remain structurally weak for years. But there is a worse case: lack of means = not enough money to support a business until the first benefits termination payments = = entrepreneurial failure.Financial ratios applied to the company's capital- "Capital is useless ..."yet objected this creator of a service company, despite my entreaties. In fact, his consulting business, does that commit it to his own intellectual capabilities and features that lucky customer contracts necessary for the immediate profitability of the company from its inception.
This is the situation today. But tomorrow? If the company through an air hole or, conversely, must have additional resources to finance rapid growth? Such unintended and unexpected performances may jeopardize the company's balance if the means of it are exceeded.
We talked about the psychology of the banker, who always has a different balance reading with the contractor. A commercial company whose equity is insufficient (so undercapitalized) is mathematically in a delicate position, since it depends on the goodwill of others. Bankers, suppliers and prospects use immutable formulas to assess the financial strength of your business before betting on it. Being "out nails" in the results of universal financial ratios, is to marginalize and take the risk of seeing doors closing at the wrong time.
Commercial Company: separate legal personality
A corporation is a legal entity that has a legal personality separate from that of natural persons who created it. The display, in private, a comfortable fortune, not within the financial ratios of your company. However, the shareholder owner always ends up being held responsible for any mismanagement: the under-capitalization of a company is a -potentiellement-. The fault will be considered all the more serious when a somewhat stingy entrepreneur is known for someone who "means" to meet the needs of the society of which he is an agent.
