sources of long term financing
TRANSCRIPT
-
7/28/2019 Sources of Long Term Financing
1/18
SOURCES OF LONG TERM
FINANCING
-
7/28/2019 Sources of Long Term Financing
2/18
TYPES OF BUSINESS
SOLEPROPREITOR
PARTNERSHIPCOMPANY
PRIVATELIMITED
PUBLIC LIMITED
-
7/28/2019 Sources of Long Term Financing
3/18
TYPES OF FINANCE
SHARES
ORDINARY EQUITY
DEBT
TERM LOANS, DEBENTURES & BONDS
HYBRID FINANCE
WARRANTS, CONVERTIBLES & OPTIONS
ALTERNATIVE FINANCING LIKE LEASE,HIRE PURCHASE, VENTURE CAPITAL
-
7/28/2019 Sources of Long Term Financing
4/18
SHARES
-
7/28/2019 Sources of Long Term Financing
5/18
SHARES
Types
Authorised Share Capital Authorised share capital is the number
of ordinary shares capital that a firm can raise without further
shareholder approval.
Issued Capital The portion of the authorised capital offered by thecompany to the investors is the issued capital.
Subscribed Share Capital Subscribed share capital is the number
of share (capital) outstanding.
Paid-up Capital The actual amount paid by the shareholders is the
paid-up capital.
Par (face) Value Par (face) value is a value arbitrarily placed on the
shares.
-
7/28/2019 Sources of Long Term Financing
6/18
FEATURES OF SHARES
Residual claim to income
Residual claim on assets
Right to control
Pre-emptive rights
Limited liability.
-
7/28/2019 Sources of Long Term Financing
7/18
ISSUE OF SHARES
IPO
FPO
RIGHTS ISSUE
PREFERENCE SHARES
QIB
-
7/28/2019 Sources of Long Term Financing
8/18
IMPORTANT POINTS IN ISSUE OF
SHARES
BOOKBUILDING
SEBI
MERCHANT BANKERS
STOCK EXCHANGES
-
7/28/2019 Sources of Long Term Financing
9/18
DEBT
-
7/28/2019 Sources of Long Term Financing
10/18
FEATURES OF TERM LOANS
MATURITY
NEGOTIATED
SECURITY / COLLATERAL
COVENANTS
-
7/28/2019 Sources of Long Term Financing
11/18
TYPES OF COVENANTS
ASSET RELATED
LIBILITY RELATED
CASH FLOW RELATED
CONTROL RELATEDNEGATIVE
PROVIDING INFORMATION
MAINTAINENCE SINKING FUNDPOSITIVE
-
7/28/2019 Sources of Long Term Financing
12/18
FEATURES OF BOND / DEBENTURE
Attributes
As a long-term source of borrowing, debentures have some
contrasting features compared to equities .
Trust Indenture When a debenture is sold to investing public, a trustee
is appointed through an indenture/trust deed.
Trust (bond) indenture is a complex and lengthy legal document
stating the conditions under which a bond has been issued.
Trustee is a bank/financial institution/insurance company/ firm of
attorneys that acts as the third party to a bond/debenture indenture to
ensure that the issue does not default on its contractual responsibilityto the bond/ debentureholders.
Interest The debentures carry a fixed (coupon) rate of interest, the
payment of which is legally binding/enforceable. The debenture
interest is tax-deductible and is payable annually/semi-
annually/quarterly.
-
7/28/2019 Sources of Long Term Financing
13/18
-
7/28/2019 Sources of Long Term Financing
14/18
INNOVATIVE DEBT INSTRUMENTS
ZERO COUPON BONDS
DEEP DISCOUNT BONDS
SECURED PREMIUM NOTES
FLOATING RATE BOND
CALL / PUT BONDS
FCCB
-
7/28/2019 Sources of Long Term Financing
15/18
HYBRID FINANCING
INSTRUMENTS
-
7/28/2019 Sources of Long Term Financing
16/18
-
7/28/2019 Sources of Long Term Financing
17/18
ALTERNATIVE FINANCING
-
7/28/2019 Sources of Long Term Financing
18/18