Film Financing –
Film finance is an aspect of film production that occurs during the development stage prior to pre-production, and is concerned with determining the potential value of a proposed film. In the United States, the value is typically based on a forecast of revenues over a ten- to 15-year period, beginning with theatrical release, and including DVD sales, and release to cable broadcast television networks both domestic and international and inflight airline licensing.
Government Grants –
A number of governments run programs to subsidise the cost of producing films. For example, in the United Kingdom the UK Film Council provides funding to producers provided certain conditions are met. States such as Louisiana, Massachusetts, New York, Connecticut, Oklahoma, Pennsylvania, Michigan, and New Mexico, will provide a subsidy or tax credit provided all or part of a film is filmed in that state. Governments are willing to provide these subsidies as they hope it will attract creative individuals to their territory and stimulate employment. Also, a film shot in a particular location can have the benefit of advertising that location to an international audience. Government subsidies are often pure grants, where the government expects no financial return.
Tax Schemes -
A number of countries have introduced legislation that has the effect of generating enhanced tax deductions for producers or owners of films. Schemes are created which effectively sell the enhanced tax deductions to wealthy individuals with large tax liabilities. The individuals pay the producer a fee in order to obtain the tax deductions. The individual will often become the legal owner of the film or certain rights relating to the film, but the producer will in substance continue as the real owner of the economic rights to exploit the film. Governments are beginning to recognise that enhanced tax deductions are an inefficient way of supporting the film industry. Too much of the tax benefit is siphoned off by promoters of the tax scheme. Also, films with little commercial or artistic merit are produced simply to generate tax deductions. In 2007 the United Kingdom government introduced the Producer's Tax Credit which results in a direct cash subsidy from the treasury to the film producer. For example, many wealthy people do a tax scheme by investing in films which means their money goes to the people who are making this film instead of the Government, by doing this, this means they will get money if the certain film they have chose to invest in, does really well in the industry then they will get profit out of it instead of loosing money by giving it to the tax from the Government.
Debt Finance –
A debt is an obligation owed by one party (the debtor) to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value. A debt is created when a creditor agrees to lend a sum of assets to a debtor. Debt is usually granted with expected repayment; in modern society, in most cases, of the original sum plus interest. In finance, debt is a means of using anticipated future purchasing power in the present before it has actually been earned. Some companies and corporations use debt as a part of their overall corporate finance strategy.
Equity Finance –
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists. In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock. At the start of a business, owners put some funding into the business to finance operations. This creates a liability on the business in the shape of capital as the business is a separate entity from its owners. Businesses can be considered, for accounting purposes, sums of liabilities and assets; this is the accounting equation. After liabilities have been accounted for the positive remainder is deemed the owner's interest in the business. This definition is helpful in understanding the liquidation process in case of bankruptcy. At first, all the secured creditors are paid against proceeds from assets. Afterward, a series of creditors, ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such cases where even creditors could not get enough money to pay their bills, nothing is left over to reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital or liable capital.
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