Stephen Hruby Ch 12 BE 36,37,38 Case 46 (Ebbicott) BE 36. Source of capital processes are processes to authorize the raising of, execution of, and accounting of capital. Capital transactions should be executed only when top management or the board of directors authorizes them, and use of the capital must be properly controlled. If there is a recognized capital need and the board approves this need, the decision needs to be made whether to raise capital through equity or debt. If raising capital through equity, the company would use a stock underwriter to sell stock and collect proceeds. Dividends are often paid for equity, but they are not required. If the decision is made to raise capital through debt, you then must decide whether to issue bonds or loans. Bonds are also issued through a bond underwriter and have periodic interest payments. Loans are arranged through banks and consist of the paying back of interest and principal through periodic (basic) lease payments. BE 37. Investment processes authorize, execute, manage, and properly account for investments
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