Terminology Flashcards
(13 cards)
Yield
How much income you earn on an investment, expressed as a percentage of the initial investment
.
Unsecured bond
Type of loan where the issuer borrows money from the investor with no specific assets as collateral.
Methods of share issue
Offer for sales
Placing
Rights issue
Theoretical Ex-rights price (TERP)
Expected share price after the rights issue
Total value of investment / Number of Shares
Share price - value of right per share
Right per share
TERP - Issue Price/Ratio
Residual Theory
All retained earnings should be re-invested in projects with a positive NPV.
When all opportunities are exhausted, any residual earnings will be paid out as dividends
Traditional View Theory
Pay out dividends at a level that maximise the share price
-based on DVM and gordan’s growth model
Irrelevancy Theory
company’s value doesn’t change based on whether it uses debt or equity to raise money, as long as there are no taxes or extra costs. In an ideal market, the way a company is financed doesn’t affect its total value.
Fixed charge
Debt is secured against specific assets
Floating charge
Debt is secured over general assets and only “Crystallises” onto a specific asset when the loan is defaulted
Limited Liability
Means that owners or shareholders of a company are not personally responsible for the companies debts or financial losses
Maturity Gap
Is the difference between the time when a companies Assets and Liabilities are due to be paid back
About balancing when money is coming in and going out
Sunk cost
A cost that has already been incurred
