Fabrics Ltd currently supplies soft furnishings to wholesalers, largely on credit terms. Its share capital comprises 100,000 £1 ordinary shares. The company has recently decided to raise more capital as it wants to extend its business via an internet site selling mail order curtains to non trade customers.
Fabrics Ltd seeks your advice on the following points:
a) In the event that it issues preference shares instead of ordinary shares, what are the differences between the two?
b) If it issues secured debentures, what are the differences between a floating charge and a fixed charge?