Long Term Finance Flashcards
What is equity?
What is debt?
Shares
Bank borrowings and bonds
Which shares are paid at the discretion of the directors?
What do preference share owners receive?
What are preference shares paid out of?
Ordinary
Fixed dividend
Post tax profits
What are the types of preference shares?
What are P shares?
Cumulative, non cumulative, convertible, participating
Fixed dividend + more based on conditions met
Debt finance
What is interest paid normally?
Must interest be paid?
What is a benefit of interest paid?
Why is it less risky than equity?
What is it secured on and what are the two ways?
What is a covenant?
% of nominal value
Yes legally
It is tax allowable
Must be paid not linked to performance
Assets on fixed or floating charge
A clause
What are the 2 main types of debt finance?
What is a bond?
What does the investor receive?
Where can it be sold?
What happens at end of period?
Borrowings or bonds
Financial instrument that can be traded
% on nominal value
On the bond market
Redeem the total amount
Capital markets
What can you sell on them?
What is the primary function?
What is the secondary function?
Equity and debt
Raise new medium to long term finance
Sell equity/debt instruments to investors
Investors sell investments to other investors
Obtaining a listing on the stock market
What is a listing on the stock exchange known as?
What does the comp need to offer?
What are the 3 ways to issue new shares?
Floatation or IPO
Shares
Rights issue, offer for sale, placing
What is an offer for sale and how is the price set?
What is placing?
What is a rights issue? What are preemption rights?
New shares offered to new investors- fixed price or for tender
Large % of shares to small shareholders - institutional investors
Existing shareholders offered right to buy new shares in proportion to existing shares
Protected by law
What is underwriting?
What is charged?
Financial institute agrees to buy shares if not sold so can guarantee will make finance needed
% of amount of new finance
