Business finance

Question 1

Sources of long-term finance

Answer 1

Debt
Preference Shares
Ordinary shares

Question 2

Sources of equity finance (in order)

Answer 2

Retained earnings (internal - no issue costs)
Right issue (low issue costs)
Public offer (high issue costs)

Question 3

Internal sources of finance

Answer 3

Retained earnings
Improving working capital management efficiency

Question 3

Sources of debt finance

Answer 3

Irredeemable
Redeemable
Convertible
Loan stock with warrants

Question 4

Loan documentation

Answer 4

Representation and warranties
Guarantees
Covenants

Question 5

Considerations when deciding which type of finane to use

Answer 5

Impact on financial performance
Impact on financial position
Cost of the finance / impact on WACC
Impact on the shareholders
Matching to term / risk

Question 6

Methods of ‘financing green’

Answer 6

Green loans
Sustainability linked loans
Green bonds
Green funds
Social bondsD

Question 7

Dividend policy

Answer 7

Residual theory
Irrelevancy theory

Question 8

Alternatives to paying a cash dividend

Answer 8

Share repurchase
Scrip dividend

Question 9

Estimating the cost of equity techniques (Kₑ)

Answer 9

Dividend Valuation Model
Capital Asset Pricing Model (CAPM)

Question 10

Estimating