Professional Documents
Culture Documents
Ordinary SharesFeatures
Claim on Income Claim on Assets Right to Control Voting Rights Pre-Emptive Rights Limited Liability : No compulsion to pay dividend on it.
Advantages
1. 2. 3.
Permanent Capital Borrowing Base Dividend Payment Discretion Risk Earnings Dilution Ownership Dilution
Disadvantages
1. 2. 3.
Selling of Ordinary Shares to the existing shareholders of the company. Value of Right
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Advantages
1. 2. 3.
Disadvantages
1. 2.
DebenturesFeatures
A bond or a debenture is the basic debt instrument which may be issued by a borrowing company for a price which may be less than, equal to or more than the face value
Interest Rate Maturity Redemption Buy-back (call) provisions Indenture Security Claim on Assets and Income
Types of Debentures
Advantages
1.
2.
3.
Disadvantages
1.
2. 3.
Preference Shares
2.
Non payment of dividends does not force company to insolvency. In some cases it has no fixed maturity dates.
Similarity to Debentures:
1. 2. 3.
Dividend rate is fixed. Do not share in residual earnings. Usually do not have voting rights.
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Preference SharesFeatures
Claim on Income and Assets Fixed Dividend Cumulative Dividend Redemption Convertibility
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Advantages
1. 2. 3.
Disadvantages
1. 2.
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Term LoansFeatures
4.
Asset related covenants Liability related covenants Cash flow related covenants Control related covenants
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Accrued expenses
The accrued expenses refer to the services availed by the firm, but the payment for which has not yet been made.
Commercial Papers
Commercial Paper (CP) is an unsecured promissory note issued by a firm to raise funds for a short period, generally, varying from a few days to a few months
companies borrow funds for a short-term period, say up to six months, from other companies which have surplus liquidity for the time being
Inter-corporate Deposits :
Companies have raised short-term funds by the issue of unsecured debentures for periods up to 17 months and 29 days. The rate of interest on these debentures may be higher than the rate on secured long-term debentures.
Bank Credit
Credit facility provided by commercial banks to meet the short-term and working capital requirements has been important short term sources of finance in India.
INTERNATIONAL SOURCES
Depository Receipts (DR) A DR means any instrument in the form of a depository receipt or certificate created by the Overseas Depository Bank outside India and issued to the non-resident investors against the issue of ordinary shares.
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