fmgt_long term financing

8/16/2019 FMGT_Long Term Financing

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Long Term FinancingBy Huang Ying, Maureen, Chloe, HongWei, Ian


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Long Term Financing

Definition:• A form of financing where liabilities

(plus interest) would not be due within one year.

urposes:• To finance fi!ed assets• To finance permanent funds• For company"s e!pansion ( pro#ects$ construction)


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Asset % Debt financing & 'uity Financing

Long Term Financing

Long term loan fromban* financialinstitute (repayablewithin period + , year)

Debentures* -ond

ssue of shares(/rdinary*reference)


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Debt Financing (Long Term)

Advantages Disadvantages• Interest is tax

deductible

• No dilution ofownership

• No future lender

claims

• Help in futureforecasting

• Reduce cash ow(due to xed

payment)

• Restriction fromcreditor

• High risk ofinsolency


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'uity Financing (Long Term)

Advantages Disadvantages• !ess risky No re"uirement topay

• #ollow$up funding

• %usiness experience

from inestor

• &ilution ofownership

• &iidends is not taxdeductible

• 'ime consuming to

nd right inestors


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0ase 1tudy

112 raises 1345m to fund e!pansion throughplacement of new shares "uity

#inancing

(long term)urpose:• 6aise funds to purchase new properties

for outlet e!pansion


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112 Financing 7istory (85,,985,)

Liabilities• ;o financing• Deferred ta!• Trade and others

payable

/wner"s 'uity• ssue of shares in 85,,

< 85,

0onclusion:

•

112 maintain debtfree o=er years

• /nly use euityfinancing (ordinary

shares issue )


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112 -usiness erformances(85,,985,)

*++ *+ *+, *+-+

+./

./

,

,./

-

-./

0ross 1rot 2argin

0ross 1rot 2argin

%


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>hy 112 use euity financing?

ossible reasons:

• To a=oid restriction from lenders

•

0onser=ati=e beha=iour9 To a=oid ris of insol=ency (if company unable to pay)

• To reflect good financial position (debt free) toattract in=estors

• To obtain @business e!perience from in=estors


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Analysis: Bey Differences

Debt Financing EquityFinancing

• 'ax adantage • No tax adantage

•Higher risk ofinsolency

•!ower risk ofinsolency

• No dilution ofownership

• &ilution ofownership

• !ess costly • 2ore costly

&%' nancing is

better


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0onclusion

,st reason: Less costly

• 'ax adantage• Interest 3 &iidend

8nd reason: 1table business performance• 440 is making prot oer years

• has ability to a5ord the repayment (loan 6interest)

• risk of insolency

112 is recommended to use D'-T financing


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6eferences• http:**www.ascentcapital.net*hello9world*

• http:**www.nfib.com*article*ital9C55E*

• http:**finance.mapsofworld.com*finance9theory*term

9financing*

• http:**in=est.leechenghua.com*sheng9siong9group9raises9s45m9fund9e!pansion

* • http:**www.sg!.com*
http://www.ascentcapital.net/hello-world/http://www.ascentcapital.net/hello-world/http://www.nfib.com/article/ital-50036/http://finance.mapsofworld.com/finance-theory/term-financing/http://finance.mapsofworld.com/finance-theory/term-financing/http://finance.mapsofworld.com/finance-theory/term-financing/http://invest.leechenghua.com/sheng-siong-group-raises-s80m-fund-expansion/http://invest.leechenghua.com/sheng-siong-group-raises-s80m-fund-expansion/http://invest.leechenghua.com/sheng-siong-group-raises-s80m-fund-expansion/http://www.sgx.com/http://www.sgx.com/http://www.sgx.com/http://www.sgx.com/http://invest.leechenghua.com/sheng-siong-group-raises-s80m-fund-expansion/http://invest.leechenghua.com/sheng-siong-group-raises-s80m-fund-expansion/http://invest.leechenghua.com/sheng-siong-group-raises-s80m-fund-expansion/http://finance.mapsofworld.com/finance-theory/term-financing/http://finance.mapsofworld.com/finance-theory/term-financing/http://finance.mapsofworld.com/finance-theory/term-financing/http://www.nfib.com/article/ital-50036/http://www.nfib.com/article/ital-50036/http://www.ascentcapital.net/hello-world/http://www.ascentcapital.net/hello-world/http://www.ascentcapital.net/hello-world/

fmgt_long term financing

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