Financing limited com Flashcards
(32 cards)
Có bao nhiêu source of finance?
Internal vs external source
Internal sources of finance gồm?
- Long term finance
Retained profits - Short-term finance
Tight credit control of receivables
Reducing inventories
Delaying payments to suppliers
External sources of finance gồm?
Capital = the long-term financing of a company
Share capital
Funds are raised by selling shares in the company.
The shareholders are the owners of the company.
Loan capital
Funds are raised by obtaining a loan.
Lenders are not owners but creditors of the com.
Thứ tự rủi ro tăng dần của long-term capital?
1/ Loan capital
2/ Preference capital
3/ Ordinary capital
Trong share capital có?
Preference capital
Ordinary capital
Đặc điểm của Ordinary capital
returns from dividends and increased share value
give voting rights at meetings
irredeemable (ko đổi lại đc)
dividends are at discretion of directors (tuỳ ý)
rank after all other creditors in a winding up
authorised and issued capital
nominal value and market value
variations - eg redeemable, non-voting
high risk/high reward
Đặc điểm của Preference shares
fixed dividend
usually no voting rights
usually cumulative and irredeemable (tích luỹ)
risk is less than for ordinary shares but more than for loan capital
Rank ahead of ordinary shares if company is wound up.
Variations:
Participating (right to share of profits over a certain amount)
Convertible (right to convert into ordinary shares in the future)
Đặc điểm của Loan Capital
- return to investor is interest (plus repayment of capital)
- Pattern of interest and capital payments determined at outset (từ ban đầu)
- may be listed on stock exchange
- lenders do not have voting rights
Loan covenants (giao ước) deal with matters such as?
- Dividend payments
- Access to financial statements
- Other loans
- Liquidity.
Debentures là gì?
Loans secured on some or all of company’s assets
Debentures có đặc điểm chi?
- Mortgage debenture is secured by a specific asset
- Floating charge debenture allows company to use assets in trading
- Risks gồm non-payment, inflation and low marketability
Unsecured loan stocks có đặc điểm chi?
- No specific security for loan
- Greater risk, reflected in market value
- May be convertible (right to convert into ordinary shares at a later date)
Eurobond loan capital
- loan capital issued in a currency other than the currency of the country in which it is issued
- does not come under tax or legal control of any country
- usually fixed interest payments made annually
- usually unsecured
- mostly traded through investment banks
- used to raise large sums of foreign currency– usually $75m or more
- may obtain a lower rate of interest than available domestically, but exchange rate risks
Medium term company finance
Hire purchase
- initial rental period, then purchase at the end of the period
- ownership passes on final payment
Hire purchase agreements often involve three parties
Supplier, customer, financial institution
Leasing là gì?
asset is ‘rented’ for a period
ownership does not transfer to lessee
Leasing gồm?
- Finance leases Lessee takes on risks of ownership (repair costs /insurance) - Operating leases Owner of asset retains risks
Credit purchase là chi?
- Company purchases an item, and agrees to make payment in instalments (trả góp)
- Ownership passes immediately to purchaser
Bank Loans là chi?
- interest payments
- usually secured
- repaid at end of term
Short term company finance gồm ?
immediate payment can be demanded
interest payable on overdrawn amount only
an agreement between a company and suppliers to pay later
no interest normally charged (may give discount for paying on time)
Factoring là gồm?
company sells its accounts receivable to a factor
factor takes on responsibility for collection
loan secured against outstanding invoices
credit risk remains with the original seller
Đặc điểm của Commercial paper?
- bearer documents for large denominations, (minimum size £500,000) issued at a discount and redeemed at par (face value)
- Fixed maturity date of between 1 and 270 days
- Used to meet short-term debt obligations
- No security offered, so can only be used by companies with excellent credit rating
- not listed on stock exchange, but issuing companies must be listed
Bills of exchange là chi?
- A sells goods to B
- A asks B to sign a bill of exchange, to confirm that B will pay A (or anyone nominated by A) on the day the debt becomes payable.
- A can then sell the bill to C, thereby getting immediate payment (although at a discount)
- C can sell on to D and so on until eventually someone presents it to B for payment
Payment ranking when a company is wound up?
1/ Fixed charge creditors
2/ Floating charge creditors
3/ Preferential Creditors
Include employees’ claims for arrears of wages, holiday pay and pension payments (limited by law)
Also any unpaid taxes
4/ Unsecured creditors
This includes trade payables
5/ Connected creditors
Loans or unpaid salary for directors and their spouses and close family
6/ Preference Shareholders
7/ Ordinary shareholders
