Capital Increase And Decrease

The capital of a firm may be deceased for a number of reasons. This method is frequently used by businesses to boost shareholder value, create a more effective capital structure, or eliminate accumulated losses from the financial statements. The corporation transfers a portion of the capital equal to the value of the "accumulated losses" in order to "zero" them in the event that they are written off form the financial statements.

Capital decrease:

It should be mentioned that the investor will have fewer shares when the capital is decreased by the amount of the loss, by an amount equal to the reduction.

Capital Increase:

A firm is obliged to grow its capital when it is forced to do so by the expansion of its operations, the opening of additional branches for it, or the acquisition of assets  to raise the caliber of its production and the services it offers.

The strategies or representations the business uses to raise financing:

1. Make payment in cash or kind for the capital increase.

2. Using the credit balances of the partners current accounts.