Long-Term Financing Measures

Long-Term Financing Measures
Financing Financing comes in different forms and is issued for various reasons. It also comes with different processes and requirements and is stated
in different ways. Some financing is secured by company assets where some is unsecured and only backed by unpledged assets in the case of default.
Long–term financing measures can range from 10 year to 30 year pay back periods. A mortgage is a form of security against a loan given in
advance. The mortgage loan is a term loan secured by the mortgaged property. There are residential mortgages and commercial mortgages.
Residential mortgages are housing loans and typically are taken over a 30 year period, but can be for shorter periods. Some homeowners take them
out for a 15 year period to pay less in interest costs. Commercial mortgages are usually a period of less than 10 years. Mortgage loans include either
fixed or variable interest rates. The fixed interest rates will typically reset every two to three years. The variable interest rates fluctuate at the interest
rates fluctuate with the economy. Mortgage loans are usually amortized with monthly loan installments. If the amounts are above 80% of the
loan–to–valuation–ratio, it will generally require mortgage insurance to be maintained for the life of the loan. If the homeowner does not maintain the
mortgage insurance for the life of the loan, they could be considered in default of the loan, giving the mortgage company the right to demand the full
balance owed at that
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Chapter 7: Corporate Reorganizations Research Problem 1...
Research Problem 1) New Gate corporation desires to acquire Old Post in a non–taxable transaction. Prior to entering into this transaction with New
Gate, Old Post issues $800,000 worth of 15–year bonds paying 6% annually. The bonds are purchased by most of Old Post's shareholders and also by
many individuals who have no affiliation with Old Post. New Gate makes an offer to the shareholders to exchange two shares of its common voting
class Astock for each common share of Old Post and 20 of common voting class B stock for each preferred share of Old Post. Most of the
shareholders are reluctant to make the exchange because of the favorable terms of the Old Post bonds they are holding. Consequently, New Gate offers
to acquire all of ... Show more content on Helpwriting.net ...
Some of the debentures of Y are held by its shareholders, but a substantial proportion of the Y debentures are held by persons who own no stock.
Further reading indicates the reorganization of Old Post and New Gate will qualify as a "Type B" tax–free reorganization even with the bonds involved
because due to the fact that there are many non–stockholders who are bond holders.
Regarding the bond exchange offered by New Gate, any gain is not recognized per this IRS ruling:
Section 354(a)(1) provides that no gain or loss will be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of
the plan of reorganization, exchanged solely for stock or securities in another corporation a party to a reorganization.
I'm working off of the premise is that the bond exchange is not a part of the voting stock exchange by New Gate to Old Post shareholders but rather is
a separate exchange.
The New Gate offer of exchanging stock of varying common classes does meet the IRS ruling requirements listed below:
Section 1.368–2(c) of the Income Tax Regulations provides: In order to qualify as a "reorganization" under section 368(a)(1)(B), the acquisition by
the acquiring corporation of stock of another corporation must be in exchange solely for all or a part of the voting stock of the acquiring corporation .
. . , and the acquiring corporation must be in control of the other corporation immediately after the

Dogloo
Overview Lewis Byrd, a partner of Opportunity Capital Partners and the lead in the Dogloo investment, is currently facing the issues below: * Dogloo
is in the lawsuit regarding Doskocil's trademark infringement, which is consuming large amount of money and management time thus detrimental to
Dogloo's healthy growth. * Dogloo's products are facing significant increasing market demand, which exposed its outsourced manufacturers' inability to
increase capacity and led into lost sales. * Aurelio Barreto, CEO of Dogloo, is not meeting expectations to work within the financial and organizational
constraints of the company, despite his strong product development and marketing capabilities. The proposed solutions are outlined below... Show more
content on Helpwriting.net ...
Analysis – Investment Structure The total amount of the investment is worth $7 million and is invested by the below parties: * Synenergy Diversified
Capital – committed capital of $6.25 million * Opportunity Capital Corporation – $150,000 * Opportunity Capital Partners – $600,000 The $7 million
is in the form of subordinated debentures that matures in 7 years with an interest rate of 13%. This rate is very high because subordinated debentures
investors bear significantly more risk, which is a major drawback of this form of investment since the debt might not be repaid. The biggest benefit for
Dogloo to issue subordinated debenture is that the subordination makes the debt being accounted in the company's equity based on the balance sheet.
This effectively improves the company's leverage ratios and allows the company to obtain future loans more easily. Analysis– Return on Investment
OCC and OCP together invested $750,000 into Dogloo in the form of subordinated debenture with 13% interest rate, which guarantees them stable
interest cash inflows each year (Exhibit 4). The two investors' combined ownership interest will be 0.5% of the Dogloo's equity value because the
company's equity valuation is $213 million, exceeding $80 million; this will be the cash inflow at exit for the investors. Through calculation, the
required equity value at exit is $238 million if the investors have an estimated IRR of 25% (Exhibit 4). Conclusion Based on the

Indian Financial System
FINANCIAL MANAGEMENT ASSIGNMENT ON INDIAN FINANCIAL SYSTEM & SOURCES OF LONG TERM AND SHORT TERM
FINANCES SUBMITTED BY, PREMJITH.A P10144 PGDM 2010–12 INDIAN FINANCIAL SYSTEM The financial system in india refers to the
system of... Show more content on Helpwriting.net ...
They may be issued with or without a maturity period. REDEEMABLE PREFERENCE SHARE are shares with maturity and IRREDEEMABLE
PREFERENCE SHARES without any maturity. The holder of preference shares get dividend at a fixed rate. With regards to dividend, preference
shares may be issued with or without cumulative features. In the case of CUMULATIVE PREFERENCE SHARES unpaid dividends accumulate
and are payable in the future. Dividends in arrears do not accumulate in the case of NON CUMULATIVE PREFERENCE SHARES. Features of
Preference share Claim on income and assets: preference share is a senior security as compared to ordinary share. It has a prior claim on the
company's income in the sense that the company must first pay preference share dividend before paying the ordinary dividend. Fixed dividend:
The dividend rate are fixed in the case of preferences share, and preference dividend are not tax deductable. Cumulative dividend: that all past
unpaid dividend be paid before the ordinary dividends are paid. Ordinary Shares: represents the ownership position in a company. The holders of
ordinary shares called shareholders are the legal owners of the company. Ordinary shares are the sources of permanent capital since they do not have a
maturity date. However, the ordinay shareholders are entitled to receive dividends. The amount or rate of dividends are not fixed. An ordinary share is

bank 301
9: Woodside Petroleum Limited is about to raise additional short–term funding to meet its funding needs over the next three–month planning period. It
is considering issuing commercial bills or promissory notes.
(a) What is a promissory note? Identify and briefly explain the roles of the parties to a P–note issue.
(b) What are the main differences between P–notes and commercial bills of exchange?
A promissory note, which typically has a maturity of 90 days, is described as 'an unconditional promise in writing made by one person to another,
signed by the maker engaging to pay, on demand at a fixed or determinable future time, a sum certain in money to the order of a specified person or to
the bearer' (Viney & Phillips 2012, 308).
The ... Show more content on Helpwriting.net ...
(b) Explain the effects of the with–resource and notification conditions that may be incorporated in a factoring contract.
Factoring is the means in realising debts whereby a firm sells its receivables to a factoring company, which will then chase the creditors for the debts,
making this form of debts a form of asset–based finance (Kravaica et al 2006). The factoring firm would purchase the accounts receivable at a
discount to the face value, which is the cost of the firm's efforts in collecting the debts on behalf of the firm. The cost of the firm is the discount of
the accounts receivable but the benefit of the firm relying on the factoring service is its access to the funds and not having to expend its efforts in
chasing for the debts (Viney & Phillips 2012, 313).
Factoring has been used in increasing popularity for small and medium sized enterprises because these firms do not have the advantage of a large
firm in terms of borrowing and therefore, rely on factoring for their working capital (Borgia et al 2010).
The factoring contract may vary for different firms but it will specify the parties that are responsible for future bad debts in case some of the debts
become uncollectible. A contract with recourse factoring means that the factoring company may make a claim against the firm should the accounts
receivable debt becomes bad (Viney & Phillips 2012, 313). Logically, the contract with recourse would have a lower discounting to the

Debentures Essay
Debenture is most important instrument and method of raising the loan capital by the company. A debenture is like a certificate of loan or a loan bond
evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part
of the company's capital structure, it does not become share capital. Section 2 (30) of the Companies Act, 2013 define inclusively debenture as
"debenture" includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the
company or not.
The power to issue debentures can be exercised on behalf of the Company as a meeting of the Board under the provisions of Section 179 (3) of the
Companies Act, 2013. Further Section 71 of the Companies Act, 2013 deals with the provisions relating to the issuance of debentures provides that a
company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption. Provided that
the issue of debentures with an option to convert such debentures into shares shall be approved by a special resolution passed by the shareholders in a
duly convened general meeting of the company. ... Show more content on Helpwriting.net ...
It enables issue of shares to debenture holders in exchange of the amount due to them, where the terms of issue of debentures provide for such an
exchange and such terms are approved both by the special resolution of the general meeting and by the Central Government. Joint Stock Companies can
issue either non–convertible or convertible debentures. Convertible debentures are further classified as
A. Fully convertible debentures

Mci Coorporation
1. What is the likely level of MCI's external financing needs over the next several years?
Based on the Exhibit 9A in the case, we can calculate the Source and Use of Funds. As Exhibit 1 suggests, the company require about $4.8 billion
during 1984 and 1990. This is basically due to the required new capex during the same period, which will be accumulated to $10.2 billion, and the
increase of cash holding, $2.0 billion, as a use of funds and the company can generate funds from operation, only $7.8 billion. Therefore, the company
needs to fill the gap by sourcing external finance of about $4.8 billion. This amount will vary depending primarily on two factors; 1) whether MCI can
expand market share as forecasted amid the increasing ... Show more content on Helpwriting.net ...
Why?
We suggest that the company should take the option 3. Firstly, as mentioned in the above, the company requires $4.8 billion during 1984 and 1990 and
option 3 can provide largest fund compared with option 1 and 2. Secondly, the option 3 incurs the least interest rate, 7.5%. Thirdly, even though the
company needs to increase the debt ratio in the short run, they can adjust it later with the conversion option, which gives the company flexibility for
capital

Salomon V Salomon And Co Ltd
Salomon v Salomon and Co Ltd (1897)
When was law firstly introduced? Laws where present for decades as people where punished for breaking the laws. In regard to our case, which was in
1897. The case was between Salomon v Salomon and Co Ltd, which is a person and a company he owned. He filled a case against his company that
the company owes him money and then the creditors of the company reverted the case on him as being the owner he should be liable to pay them back
as the company went to liquidation.
Facts of the case
An entrepreneur called Aron Salomon started a company that produces boots and other leather products. His children wanted to become partners with
their father so Salomon started a new company called Salomon and Co Ltd. ... Show more content on Helpwriting.net ...
He was paid 5,000 for his debentures. The money came from the sales of assets
Salomon claimed that the amount from the assets sold and bank balance was his, as he also owned debentures in the company worth 9,000, which
made the company liable to pay him back the remaining amount. After this action the creditors of the company were afraid that the company would
not pay them back. The creditors resisted Salomon's action to claim the rest of the money by filling a lawsuit against him that the balance of money
available is owed to them rather than him as he is considered the owner of the company and should be accounted for the liquidation and pay them back
from his own money if the balance from the company was not enough.
Rule of the Court
High Court
The case between Broderip v Salomon where Broderip sued Salomon to pay back the amount Broderip owed the company, was first assigned to the
high court with the judge Vaughan. We know from the facts of the case that Broderip was paid 5,000. The court considered that the company is an
agent by which it was held by Salomon so the first court ruled that Salomon and Co Ltd are considered as the same person but with different names
so Salomon was held liable to pay the creditors or in this case Broderip back his debenture amounts. Judge Vaughen ruled to Broderip against Salomon

and held Salomon liable to pay back the debenture amount remaining to Broderip.
Court of

Law Case Study
Facts of Solomon v Solomon
Solomon was a leather merchant who converted his business into a Limited Company as Solomon & Co. limited (the 'company'). The company so
formed consisted on Solomon, his wife and five of his children as members. The company purchased the business of Solomon for ВЈ39,000; the
purchase consideration was paid in terms of ВЈ10,000 debentures conferring a charge over the company's assets, ВЈ20,000 in fully paid, ВЈ1 share each
and the balance in cash.
The company in less than one year ran into difficulties and liquidation proceedings commenced. The assets of the company were not even sufficient to
discharge the debentures (held entirely by Solomon himself). And nothing was left for unsecured creditors. The liquidator... Show more content on
Helpwriting.net ...
For many years he ran his business as a sole proprietor. By 1892, his sons had become interested in taking part in the business. Salomon decided to
incorporate his business as a Limited company, Salomon & Co. Ltd.
At the time the legal requirement for incorporation was that at least seven persons subscribe as members of a company i.e. as shareholders. Mr.
Salomon himself was managing director. Mr. Salomon owned 20,001 of the company's 20,007 shares– the remaining six were shared individually
between the other six shareholders (wife, daughter and four sons). Mr. Salomon sold his business to the new corporation for almost ВЈ39,000, of which
ВЈ10,000 was a debt to him. He was thus simultaneously the company's principal shareholder and its principal creditor.
He asked the company to issue a debenture of ВЈ10,000 to him. However, a sudden slow down in business occurred and the company could no longer
pay interests to Salomon. Even the wife puts money, but the company still cannot pay. Finally, Salomon transfers the debenture to one B, but still the
company could not pay. B is here a secured creditor, in relation to the company, as he holds in respect of his a security over property of the company
in term of the debenture. B called for a receiver and therefore, sold the easiest part of the company, i.e., the factory to cover his debts. That led to the
end of the

Salomon & Co. Ltd Case
Salomon V Salomon & Co Ltd case: Salomon was a prosperous leather merchant who specialized in manufacturing leather boots. For a long time he
ran his business as a sole proprietor. By 1892, his sons had become fascinated with taking part in the business. Salomon chose to consolidate his
business as a Circumscribed company, Salomon & Co. Ltd. At the time the licit requisite for incorporation was that at least seven persons subscribe as
members or partners of the organization i.e. as shareholders. And Mr Salomon was managing director. Mr Salomon possessed 20,001 of the company
's 20,007 shares – the remaining six were shared individually between the other six shareholders (wife, daughter and four sons). Mr Salomon sold his
business... Show more content on Helpwriting.net ...
First court: The judge, Vaughan Williams J. acknowledged this argument, deciding that since Mr Salomon had made the organization singularly to
exchange his business to it, therefor the organization and Salomon were one unit; the organization was actually his specialists and he as vital was
at risk for obligations to unsecured lenders. Court of Appeal: The Court of Appeal also ruled against Mr. Salomon, on the grounds that Mr.
Salomon had abused the privileges of incorporation and limited liability, which the Legislature had intended only to confer on "independent bona
fide shareholders, who had a mind and will of their own and were not mere puppets". The lord justices of appeal variously described the company
as a myth and a fiction and said that the incorporation of the business by Mr. Salomon had been a mere scheme to enable him to carry on as before
but with limited liability. The Court of Appeal additionally ruled against Mr. Salomon, in light of the fact that Mr. Salomon had misused the benefits
of incorporation and limited liability. The House of Lords: The House of Lords upon critical clarification of the 1862 Companies Act, crushed the
ruling of the Court of Appeal's. As Salomon followed the required procedures to the set the company; shares and debentures were issued. The House of
Lords held that the firm has

Mengchao Essay
rP os t
5 – 2 9 6– 0 7 0
REV. JANUARY 29, 2004
TEACHING NOTE
op yo Arley Merchandise Corporation
Objectives and Synopsis
The Arley Merchandise Corporation represents an example of a corporate issuer attempting to realize a higher price for its common shares by offering
potential investors a "money–back guarantee." In this instance, the guarantee takes the form of a European put option (called a "Right" in the case)
which is exercisable two years from the date of issue.
In some ways, the case represents an example of the design of a security to overcome information asymmetries in the capital markets. Arley's
management has projected a highly confident picture to the underwriters that the company's future profit ... Show more content on Helpwriting.net ...
The unit proposed for sale in the Arley financing then can be characterized as the sale of a share of common stock plus a two–year European put option
with a strike price of $8 or, alternatively, through put–call parity, as the sale of a two–year zero–coupon note with face value $8 plus a two–year
European call option on common stock with an exercise price of $8. Thus, the value of the unit can be broken down in two ways: tC
Market value of the unit
= Market value of stock + market value of put option
= Market value of zero–coupon bond + market value of call option
No
Applying the Black–Scholes model with a two–year riskless rate of 11% per annum, an initial stock price of $6.50, and a volatility of 40% (as

indicated in the assignment question), yields values of the put and call options of $1.44 and $1.45, respectively.1 Exhibit 4 shows historical volatility
data for comparable firms. The instructor can engage the students in a discussion of how to use this information in the analysis. The Appendix to this
teaching note contains a discussion of these comparables and sensitivity analysis. However, Black–Scholes is not necessarily applicable because of
default risk associated with this particular put option. That is, put option holders will wish to exercise their right to receive cash at precisely the time
that Arley's stock is low, which is also when the firm will least be able to fund the $8

The 1956 Act 1956: The Companies Act, 1956
The Companies Act, 1956 is the most important legislation in India that gives Central Government power to regulate the formation, financing,
functioning and winding up of companies. The 1956 Act empowers the Central Government with the right to do the following:
a.Inspect the books of accounts of the company
b.Direct special audits and order investigations into the affairs of the company
c.Launch a prosecution in case of violation of the 1956 Act
The terms merger or amalgamation have not been defined in the 1956 Act, though this voluminous piece of legislation contains 69 definitions in
Section 2. The concept paper recently issued by the Ministry of Company Affairs, the fate of which is still unknown, contained 100 such definitions but
still stopped short of defining merger or amalgamation. The terms merger and amalgamation are synonyms and the term 'amalgamation', as per Concise
Oxford Dictionary, Tenth Edition, means, 'to combine or unite to form one organization or structure'.
The provisions relating to merger and amalgamation are contained in sections 391 to 396A in Chapter V of Part VI of the 1956 Act. Any proposal of
amalgamation or merger begins with the process of due diligence, as the proposal for merger without ... Show more content on Helpwriting.net ...
An arrangement may also involve debenture holders being given an extension of time for payment, releasing their security in whole or in part or
exchanging their debentures for the claims and the balance in shares or debenture of the company; preference shareholders giving up their rights to
arrears of debenture of the company; preference shareholders giving up their rights to arrears of the dividends, further agreeing to accept a reduces rate
of dividend in the future,

Higher National Diploma
INTRODUCTION As we are aware, finance is the lifeblood of business or it can be said as the most important part of all the business enterprises.
To understand finance, you need to know the entire business indeed. Finance can be used for various reasons like expanding the business, investing
and purchasing fixed assets like land and building, machinery so on. In order to survive in this competitive world every organisation need to have a
good strength of finance available to their business or else they won't be able to survive in this world. Hence, it is very important to select the correct
sources of finance available to the company. Finance can be in two types' external sources or internal sources. TASK ONE 1. SOURCES OF FINANCE
... Show more content on Helpwriting.net ...
This is a common method of financing a start–up. The founder provides all the share capital of the company, retaining 100% control over the business.
The advantages of investing in share capital are covered in the section on business structure. The key point to note here is that the entrepreneur may be
using a variety of personal sources to invest in the shares. Once the investment has been made, it is the company that owns the money provided. The
shareholder obtains a return on this investment through dividends (payments out of profits) and/or the value of the business when it is eventually sold.
A start–up company can also raise finance by selling shares to external investors – this is covered further below. 1.2 External sources * Loan capital
This can take several forms, but the most common are a bank loan or bank overdraft. A bank loan provides a longer–term kind of finance for a
start–up, with the bank stating the fixed period over which the loan is provided (e.g. 5 years), the rate of interest and the timing and amount of
repayments. The bank will usually require that the start–up provide some security for the loan, although this security normally comes in the form of
personal guarantees provided by the entrepreneur. Bank loans are good for financing investment in

Mci Communocations
MCI COMMUNICATIONS CORPORATION
Introduction
In 1982, the Justice department ordered the separation of ATT into local subsidiaries. MCI was one of the main competitors of AT&T and the impact
of this new competition on MCI was uncertain. In this case the financial impact of this increased competition will be analyzed.
Analysis of External Financing Needs for MCI from 1983 to 1989
Please see Exhibit 1 and Exhibit 2 MCI's external needs will keep increasing over the next few years as the operating margins would shrink because
of higher competition & higher access charges. In order to increase its market share, MCI would need to continue investing huge capitals in its
network. As per exhibit 9 of the case, it is anticipated that MCI will ... Show more content on Helpwriting.net ...
o Please see Exhibit 3. (b) $500 million of 12.5% 20 year subordinated debentures –
o Cost of debt in this case is 12.5% though MCI can raise $ 100 million more with this option in comparison to option (a) above. Servicing this debt
would be a significant drain on the cash flow. o Please see Exhibit 3. (c) $600 million Convertible offering @ 7.625% 20 year with conversion at 54 per
share o Using this option MCI can raise $ 100 million more than option (b) at 4.88% lower rate of interest. It also gives MCI an option to convert it
to equity once the stock price reaches 54 (it is currently 47). Based on previous convertible offerings (As per exhibit 6 of case, 1978, 1979, 1980,
1981 and 1982), MCI has been converting it to equity within 18 months because of its high growth. As higher growth is projected for the next few
years (Exhibit 9 of case), MCI is expected to convert this $600 million offering to equity, thereby reducing its leverage. o This option allows tofinance
its current activities and match capital inflows with expected investment outlays in the near future. It also allows MCI the option to eliminate the cash
flow drain from servicing the debt once the stock price increases. o As per Exhibit 3 attached here, this offering will provide capital to meet the
external financing needs for 1983.
3/4
Recommended Financing Alternative
(d) $1 billion 10 year debenture @ 7.5% with 18.18 warrants at $ 55 exercisable until 1988.

Advantages And Disadvantages Of Equity Share Investments
Advantages of Equity Share Investments:
пѓ Dividend: An investor is entitled to receive dividend from the company.
пѓ Capital Gain: The other source of return on investment apart from dividend is the capital gain which refers to the gains that arise due to rise in
market price of the share.
пѓ Limited liability: Liability of shareholder is limited to the extent of the investment made. If the company runs into losses, the share of loss over and
above the capital investment would not be borne by the investor.
пѓ Liquidity: The shares of the companies listed on stock exchanges have the benefit of liquidity. They can be easily transferred.
пѓ Exercise control: By investing in the company, the shareholder gets ownership in the company and thereby can ... Show more content on
Helpwriting.net ...
The issuer of the bond promises to pay a stipulated stream of cash flows at predetermined interest rates. The payment generally comprises of periodic
interests over the life of the instrument and the principal is paid at the time of redemption. The amount of risk involved in debentures or bonds is
dependent upon who is the issuer. For example, if the issuer is government, the risk is assumed to be zero. Following alternatives are available under
debentures or bonds:
Government securities – Debt instruments issued by the central, state or quasi government bodies are referred to as government securities or gilt–edged
securities. Government securities have terms ranging from 3–20 years and carry interest rates between 7–10 percent. Even though these securities are
highly secure, they are not very popular with individuals due to their lack of liquidity and low interest rates.
Savings bonds –These savings bonds are issued by the Reserve Bank of India and also known as RBI Savings Bonds or Government of India
Savings Bonds. These bonds require a minimum of Rs.1000 and have a maturity period of 5 years. The interest earned is taxable but the bonds are
exempt from wealth tax. These bonds are transferable, can be nominated and can also be offered as security for availing bank

Financial Statements
CHAPTER–I
FINANCIAL STATEMENTS
LEARNING OBJECTIVES
After studying this chapter, you will be able to:
Explain the meaning of financial statements of a company;
Describe the form and content of balance sheet of a company;
Prepare the Balance Sheet of a company as per Schedule VI Part I of the Companies Act 1956.
Know the major headings under which the various assets and liabilities can be shown.
Explain the meaning, objectives and limitations of analysis using accounting ratios
Calculate various ratios to assess the solvency, liquidity, efficiency and profitability of the firm.
Interpret the various ratios for inter and intra–firm comparison. define Cash Flow Statement
know its objectives
... Show more content on Helpwriting.net ...
Employees and Trade Unions
Employees are interested in better emoluments, bonus and continuance of business and whether the dues like provident fund, ESI et., have been
deposited with the authorities.
They would therefore, like to know its financial performance and profitability and operating sustainability.
Government and its agencies
Financial statements are used by government and its agencies to formulate policies to regulate the activities of business, to formulate taxation policies,
to compile national income accounts.
Taxation authorities such as income tax department use the financial statements for determination of income tax; sales tax department is interested in
sales while the excise department is interested in production.

Stock exchange
Stock exchange uses the financial statements to analyze and thereafter, inform its members about the performance, financial health, etc. of the
company, to see whether financial statements prepared are in conformity with the specified laws and rules and to see whether they safeguard the
interest of various concerned agencies.
Other Regulatory authorities (such as, Company Law Board, SEBI, Stock Exchanges, Tax Authorities etc.) would like that the financial statements
prepared are in conformity with the specified laws and rules, and are to safeguard the interest of various concerned

Public Joint Stock Company
Abstract:
In the name of God them Merciful the most Compassionate, I wrote this research to everyone want to successes and get a good knowledge in the
Stocks Issued by A Public Joint Stock Company (PJSC), I wrote this paper to every man and women and I put this project between their hand. I
discuss in this project the characteristics of the share, types of shares, negotiation of shares in more deep details, loan stock(Debentures) and the last
thing is the loss and destruction of shares and debentures. I try to collect as much as I can from the UAE Law. Finally, this project adds a good value
to me and I hope it will be a good paper.
First of all let me give you the definition of the company: Article 4: "a contract in accordance with ... Show more content on Helpwriting.net ...
It only states that it is the property of its bearer. This type of shares is transferred through delivery. Its holder is the owner before the company.
3)Capital shares and enjoyment shares:
Enjoyment shares are the shares whose value was consumed. The capital shares are those whose value was not consumed.
Consumption means returning the value of shares to shareholders before the company dissolution. In principle, this return should not happen because
the company member has the right to stay in it. However the consumption of shares seems necessary in certain cases. If the company property, for
instance, decays with the passage of time such as mines and quarries. These companies consume shares during their life so that shareholders don't find
themselves unable to retrieve their share value upon termination of the company.
Often, share consumption is made through assigning a part of profit each year to consume a part of shares by draw. The shareholder whose share was
consumed receive the nominal value as well as an enjoyment share granting him a right to company profit and a right to vote in the general assembly.
4)Ordinary shares and preference shares:
In principle, shares are of equal value and they grant shareholder equal rights. The company statute may, however, stipulate that the company issue
preference shares granting preferential rights relative to profits, voting or liquidation proceeds.
Negotiation of

What Are Debenture?
QUESTION 2 (a) What are the effect of pre incorporation contrast according to common law and the Malaysian Companies Act 1950? Explain the
cases relevant to the aforesaid matter.
Introduction
Often promoters of companies try to enter into contracts on behalf of proposed corporations in order to secure the contract before the time for
incorporation or to confirm the contracts for the corporation before the expense of incorporation is incurred. Normally the promoter does not have any
intention of being personally liable on the contracts. In some cases the promoter is aware that the corporation has not been incorporated but the person
dealt with is not aware that the corporation has not been incorporated. In other cases neither the ... Show more content on Helpwriting.net ...
However, the promoters did not receive a certificate of incorporation for the Gravesend Royal Alexandra Hotel Company Limited until February 20,
1866. The directors then purported to ratify the agreement again on April 11, 1866 just days before the company made an assignment in bankruptcy.
The court held that the ratification of February 1, 1866 was not a valid ratification because the company was not in existence at the time. The
ratification on April 11 was also held not to be a valid ratification because of the requirement that a ratification can only be done by a principal having
capacity to contract at the time the contract was entered into as well as at the time of the ratification. It was also not valid on the basis that the
company was not in existence at the time of the promoters purported to act on its behalf. The court nonetheless still felt there was clearly an intended
contract and the only way in which there could be a valid contract was if the defendants were the other contracting parties. They thus held that there was
a valid contract in which the plaintiffwas one party and the defendants were the other parties. Kelner v. Baxter thus confirmed that a company cannot
ratify a contract, or purported contract, entered into on its behalf if the company was not in existence at the time a person purported to enter into a
contract on its behalf. Kelner v. Baxter

Sources of Finance
Sources of Finance
The financing of every business is the most fundamental aspect of its management. Get the financing right and the company will have a healthy
business, positive cash flows and ultimately a profitable enterprise. The financing can happen at any stage of a business 's development. On
commencement of your enterprise the business entity will need finance to start up and, later on, finance to expand.
Finance sources may be internal or external but they may also be short, medium or long term. * Short Term Finance the Business for up to One year. *
Medium Term Finance the business for up to Five years. * Long Term Finance the business for more than Five years.
A. Long and Medium Term Sources of Finance 1.... Show more content on Helpwriting.net ...
* They increase their stability and raise the credit score used by banks that value the company's risk * It is a low–risk investment which increases the
chances of a company securing bank financing for future needs.
Disadvantages:
* If the company uses more bank loan, it will over–leverage company's assets.
5. Mortgages
It is the transfer of the property to a lender on the assumption that the borrower agrees to terms of repayment of the debt, after which time the asset will
be transferred to the borrower's ownership. A mortgage is a common form of security for a creditor.
Advantages:
* Interest payments on your mortgage are tax deductible. * Mortgage schedules are pre–set, making cash management more predictable.
Disadvantages:
* Mortgage requires you to pledge the purchased property to the lender. * Failure to make any payment on time, bankruptcy, insolvency and breaches
of any obligations in the mortgage agreement will be there. 6. Leasing
It is an agreement between lesser and lessee, the lessee obtains the right to use an item and assets owned by the lesser in exchange for periodic
payments. The lessee's ownership of the assets has expired at the end of given agreement period.
Advantages:
* It offers fixed rate financing; The Company pays at the same rate monthly. * There is less upfront cash outlay; the company does not need to

Cost of Capital
Cost of Capital
Definition: cost of capital is the rate of return that a company must earn on its project investments to maintain its market value and attract funds. The
cost of capital to a company is the minimum rate of return that is must earn on its investments in order to satisfy the various categories of investors,
who have made investments in the form of shares , debentures and loans. The cost of capital in operational terms refers to the discount rate that would
be used in determining the present value of the estimated future cash proceeds and eventually deciding whether the project is worth undertaking or not.
It is defined as "the minimum rate of return" that a firm must earn on its investment for the market value of the firm ... Show more content on
Helpwriting.net ...
* Marginal cost of capital – Marginal cost of capital is the weighted average cost of new funds raised by the firm. For capital budgeting and financing
decisions, the marginal cost of capital is the most important factor to be considered.
Cost of debt : Cost of debt is the interest rate that the company pays on its debt content of the capital structure. It can be measured as before tax cost
of debt or after tax cost of debt. Tax plays an important role as the debenture interest expense is allowed as an expense for tax purposes. Debt may be
issued at par, at premium or at a discount. It may be irredeemable or redeemable.
Cost of Irredeemable debt: Irredeemable debentures are those debentures issuing by which the company has no obligations to pay back the value of
the debenture on some fixed date or time and has the full authority to choose any time to pay back the debt until the company is a going entity and
does not default in it's interest payments. So we take into account only the sale value (SV) while evaluating the cost of irredeemable debentures.
Cost of Redeemable debt: For redeemable debentures, the maturity date is fixed initially. The meaning redeemable denotes that the debentures would
be redeemed by the company at a fixed date or after a specified period of notice. So, we take the average of Sale Value and Redeemable value while
calculating the cost of redeemable debentures.
Cost of Preference

Sources Of Finance : The Statement Of Financial Position
Identified sources of finance in the statement of financial position Debenture A debenture is the most common form of long term loan that can be
taken by Humbro. Debentures are usually loans that are repayable on a fixed date this is in the statement of financial position under the heading
Non–current liabilities (8,000) in both 2011 and 2012. Most debentures pay a fixed rate of interest which you can also see in the statement of
financial position under current liabilities titled debenture interest (800) for year 2011 and 2012. The main advantage of a debenture to companies
is the fact that they have a lower interest rate than overdrafts. They are usually repayable at a date far off in the future. Retained earnings Retained
earnings are profits generated by a company that are not distributed to shareholders as dividends but are either reinvested into the business or kept
as a reserve for specific objectives these being to pay off debt or purchase a capital asset. As you can see in Humbros statement of financial position
under capital and reserves they have retained earnings at 9,100 in 2011 and 10,500 in year 2012 this has shown an increase which means there is more
capital available for growth and higher returns on investments and shareholder equity. Ordinary shares Ordinary share are any shares that are not
preference shares and do not have any predetermined dividend amounts. An ordinary share represents equity ownership in a company and entitles the
owner to a

Summary Cost of Capital
The Cost of Capital
1
Background
As investors desire to obtain the best/highest return on their investments in securities such as shares (Equity) and loans to companies such as
debentures (Debt), these returns are costs to the companies paying these Dividends (on equity) and Interest (on
Debts)!
It all depends on the perspective from which we chose to view the calculation (are we Earning or Paying?)
Companies MUST consider the cost of financing they receive in the form of equity or debt if they are to manage their finances better; cheaper finance
cost to the company means higher profitability and in most cases, superior cash flow. Generally, the cost of EQUITY has no tax effect but the cost of
DEBT finance to companies are
technically ... Show more content on Helpwriting.net ...
An Example
G plc is about to pay a dividend of ВЈ50m in total. When G plc first obtained a stock market listing four (4) years ago, it paid a dividend of ВЈ30m in
total. Over the last four years there have been no changes in the share capital of G plc. You are required to estimate the annual rate of dividend growth.
Solution
[ВЈ30m Г—
3
(1 + g) 4
=
ВЈ50m] therefore, [g
=

13.62% p.a]
The Cost of Debt
Based on equivalent assumptions to those used in the DVM above, we conclude that:
PV interest stream = Market Value (MV of debenture ) Note:
(DEBT in this case!)
The tax system gives tax relief on interest payments by allowing tax deductions from company's Profit & Loss account (thus REDUCING taxable
profit). This has the effect of reducing the Cost of DEBT or what do you think?
Lower Tax means lower cost of finance as WITHOUT the tax relief, the company will pay HIGHER tax bills and the full cost of the loan BUT in this
case, you pay the FULL interest BUT save on TAX, see it?
Therefore the true cost to the company of servicing the debentures will be after the tax relief subsidy is taken into account.
www.goldsmithibs.com
An Example – irredeemable debentures
M plc has some 8 per cent coupon irredeemable debentures in issue trading at 90 ex int. Corporation tax is 30 per cent with no lag in payment. Interest
is paid annually.
Solution
PV of after–tax interest = current debenture price
ВЈ8(1 в€’ 0.30)
Kd
Kd
=
90
=
5.60
90
= 6.2% per

Health and Wealth Event
Finance is important to a business, without it, an organisation would not be able to run effectively, eventually leading the organisation to fail. The are
many reasons why Finance is important to an organisation and many factors in can be used for, i.e. investing and purchasing fixed assets like land and
building, necessary equipment and expanding the business. Organisations that have a solid finance available to their business are able implement
changes that want, which could help to bring in more money to the organisation and allowing them to last and survive. There are two types of finances,
external sources or internal sources.
Sources of Finance:
External sources of finance are available sources of income that have come from ... Show more content on Helpwriting.net ...
Debentures holder has to paid interest regularly. They also get preference of being paid first in case of wind–up of the company.
3. Public Deposits
Public also like to deposit their savings with a popular and well–established company which can pay interest periodically and payback the deposit when
due.
4. Retained earnings
The company may not distribute the whole of its profits among its shareholders. It may retain a part of the profits and utilize it as capital. The
company may use its retailed earning as long–term investment i.e. expanding business, purchasing machinery, etc.
5. Term loans from banks
As with short–term finance, banks are an important source of longer–term finance. Many industrial development banks, cooperative banks and
commercial banks grant medium term loans for a period of three to five years. For businesses, using bank loans might be relatively easy but the cost
of servicing the loan (paying the money and interest back) can be high. If interest rates rise then it can add to a businesses cost.
Advantages: You get regular income and fixed dividend coming in even if the company is making profit or not. With this share, you do not have any
interference in the management. There is Flexible Capital structure in this share.
Disadvantage:
In these shares, you are not eligible for extra dividend even if the Company make high profit. At the time of liquidation, no

Stockland Corporation Limited: A Case Study Of Stockland...
Stockland Corporation Limited is a diversified property group . It is one of Australia's largest property group . Stockland was founded in 1952 . When
the company was founded, they have a vison of contribute to the development of their cities and achieve growth and make profits .In 1957, Stockland
listed on the Australian Stock Exchange.In 1965 , Stockland opened its first commercial development . The headquarters of Stockland is located at
Castlereagh Street in Sydney, Australia . The founders of the company are Albert Scheinberg and Ervin Graf . The products of Stockland includes retail
centers, business parks, logistics centers, office buildings, residential communities , retirement living villages , housing estate, shopping center
management and others . The responsibility of the company has done towards the society and environment includes reduces energy used significantly
by using LED lights . LED lights uses less energy compared to the traditional bulb . Other than that , Stockland reduces the water used by the company
. Then , Stockland will assure that their products are in best quality before they sell it to their customers. Besides , Stockland.has a community that...
Show more content on Helpwriting.net ...
It can be classified into 2 categories . Internal source or external source of finance . Internal source of finance can be done by using retained profit. It
is the profit that the company kept rather than pay it to the shareholders . It is kept in the company for further business expanding purposes . But not
all business makes profit , it might not be enough to finance the business expansion . The advantages of choosing this source of finance is that it is
cheap because the only cost is to pay shareholders when the company earn profit . It will allow the business to have full control of the business
because there are no any new shareholders or partners come in to the company and control the business

Sahara vs Sebi Case
LEGAL ASPECTS OF MANAGEMENT ASSIGNMENT
SAHARA INDIA REAL ESTATE CORPORATION LIMITED AND OTHERS VS SECURITIES AND EXCHANGE BOARD INDIA AND
ANOTHER
Presented by: Ateendra Mishra Section a Roll No.:48
1
INTRODUCTION ABOUT THE CASE
On, 31st Aug, 2012, Supreme Court of India passed a landmark judgment wherein, the honorable court ordered business conglomerate and leading
sports sponsor Sahara to refund more than $3 billion it collected from millions of small savers. It all started when in 2008 the two companies of the
group Sahara India Real Estate Corporation Ltd. (SIRECL) and the Sahara Housing Investment Corporation Ltd. (SHICL) started raising funds through
Red Herring Prospectus (RHPs), and had collected пѓ Rs 17, 400 till March 13, ... Show more content on Helpwriting.net ...
The option has to be indicated in the application form itself. However, interest on FCDs is payable at a determined rate from the date of first
conversion to the second / final conversion and in lieu of it, equity shares are issued. Optionally Fully Convertible Debentures where the OFCD holder
(purchaser),[Generally on the discharge of the debt by the issuer entity at the specified time]gets an option to obtain equity shares of the entity issuing
(selling) such OFCDs, in lieu of cash, based on the terms determined at the time of issue/sale of these instruments.
6
Indian Laws relevant to the case
The following are the main points of contention between the two parties involved in the case. The points before the Judiciary were as follows: пѓ
The first relates to the nature of OFCDs themselves, and; пѓ The second is on whether SEBI has the jurisdiction to regulate OFCDs. пѓ Securities
Contracts (Regulation) Act, 1956
Section 2(h) of the SCR Act defines the term "securities" to include (i ) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable
securities of a like nature in or of any incorporated company or other body corporate; (ia) derivative;

(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes; (ic) security receipt as defined in clause
(zg) of section 2 of the of Security Interest Act,2002; (ii) Government securities; to be securities; and
Securitisation and

My Firm 's Services Regarding Proper Accounting Practices...
It has come to my understanding that you requested my firm's services regarding proper accounting practices for the acquisition of long term
debentures. Therefore, I write to you this memo to address some issues you might be having with your newly obtained debt and to explain how to
properly amortize it. I have been informed that you already have an accounting expert that advised you to use the Straight Line method of amortization
for the discount on the bond. My expertise lies on the Effective–Interest method of amortization. 1.Determining Bond Price To determine the price of
the bond, the face value of the bond must be brought to its present value. The rationale behind this comes from an investment principle that considers
that the money given up in the present could yield a gain in the long term if used as an investment. To arrive to the present value, we use a market rate
that represents the yield the average investor would require to spend money in a new venture (in this particular case, 11%). Therefore, even though the
Bond's face value might be $1,000,000, your company is expected to get $924,623.74. The difference between this two numbers, $75,376.26, is
considered a discount that you allow for offering a rate that is lower than the rate requested by the investors (in this case, 9%). 2.Amortization of
Discount I took the liberty of creating an amortization schedule to help you visualize the immediate difference between straight–line and effective
interest methods

Mci Case Report
Financial Strategy for Corporation
Case3
MCI Communications Corp., 1983
Estimation of external financing MCI requires until the end of 1987
MCI is the second–largest long–distance provider in the telecom industry of United States after AT&T. First of all, in this case we estimate
external financing MCI requires until the end of 1987. Exhibit 9A provides the projected capital investment needs for the following year, so our
group plug those data in Exhibit 3 corresponds to Funds from Operations and Use of Funds, then come up with the External Financing MCI needs
from 1984 to 1987 by deducting the total Source from the total Use. By looking at each year's needs, we noticed that the external ... Show more content
on Helpwriting.net ...
This better capital structure would be making it easier for MCI to raise capital in the future.
Analysis of outlook for MCI
MCI would be better to keep its capital structure of 55% debt. The cost of equity is high because raising more equity will dilute the value for existing
shareholders. Due to the fact that MCI has a high leverage, it is not feasible to issue debt. Additionally, MCI has exhausted the line of credit from the
banks and used convertible debentures frequently. MCI belongs to a competitive and regulatory industry. The high leverage will limit its potential to
grow. In exhibit 8, MCI does not have a bond rating. The convertible bond allowed the company to raise capital and convert to equity later. The
interest coverage ratio of AT&T is 3.6X whereas that of MCI is 4.2X. After increasing the market share, the company can obtain a bond rating by
decreasing its financial leverage.
Three different financing alternatives a. Debt issue:
If MCI wants to issue $500 million of 20–year subordinated debentures, we first calculate the interest payment, which is $62.5. The total interest
payment would be $116.6 by adding up the previous net interest, so we can calculate the interest coverage ratio by dividing the operating income in
1983 by the total interest payment, which is 2.53. Then we look up the

Hnd Account Report
ac
Introduction
SSP plc is engaged in food processing, supplying all the main supermarket chains with first class processed meat products. The last few years have
been difficult for the food manufacturing industry because of food scares surrounding BSE and Foot and Mouth disease, both of which have led to an
increase meat production around the world. As a responsible company, SSP have taken steps to ensure the health and safety of all there meats in the
production chain. This report will analyze the financial information users, sources of finance and SSP's ratio analysis, which shows cash flow of SSP
over the accounting period and gives and overall analysis after those ratios.
Part 1
There are six kinds of users of financial ... Show more content on Helpwriting.net ...
Bank overdraft is an agree sum by which a customer can overdraw their current account, it is secured on current assets, repayable on demand and used
for short term working capital fluctuations. It's the loan capital and short–term finance.
Trade credit is often considered a good source of finance as it is normally free. It's the largest use of capital for a majority of business to business
sellers i and is a critical source of capital for a majority of all businesses. It's the loan capital and short–term finance.
Tax is the pecuniary burden laid upon individuals or property owners to support the government and a payment exacted by legislative authority, it must
be paid but be paid later. It's the loan capital and short–term finance.
Share capital the portion of a company 's equity that has been obtained by trading stock to a shareholder for cash or an equivalent item of capital
value. There are ordinary shares and preference shares, which are paid according to the level of profits. It's the equity capital and long–term finance.
Retained profit is the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay
debt, and it's not used for dividend but for expansion. It is recorded under shareholders ' equity on the balance sheet. It's the equity capital and
long–term finance.
Debenture is a document

Desert Valley Case Summary
The purpose of this memo is to review the different options for Desert Valley's financing, taking into consideration the impact on earnings–per–share
(EPS) and the tax return.
Situational Analysis
–Marcus provided Desert Valley with a $4,000,000 loan which is repayable on demand. Now that the brewery is profitable, Marcus would like to be
repaid over the following year. The management team at Desert Valley is concerned about repaying Marcus while trying to support long–term growth
and funding the hydroponics venture.
To repay Marcus and execute on the brewery's strategic objectives, Desert Valley will need additional financing of $3,000,000. Management is trying
to decide whether a term loan, unsecured debenture, or a preferred shares issue ... Show more content on Helpwriting.net ...
The term loan and debentures will reduce net income and in turn reduce the earnings–per–share figure.
–Tax return o The term loan and debentures include interest which can be deducted before reaching taxable income while the preferred shares pay out
dividends after taxable income. Therefore, from a tax perspective, the term loan and debenture options are preferred.
Recommendation
–The debentures provide the least amount of restrictions and allows current shareholders to maintain their current ownership percentages. While it may
be the most expensive option, Desert Valley generates sufficient cash flows to absorb it. INTERNAL MEMO
TO: Keith Morse
FROM: Li Chan, CPA
DATE:September 15, 2015
SUBJECT: Activity 7B – Disaster Recovery

Julian Eastheimer Essay
As a finance student, you should be able to help Bentley by telling him which companies in Section B should use the financing methods listed in
Section A.
Section A Leasing arrangements Long–term bonds Debt with warrants Friends or relatives Common stock: non–rights Preferred stock (nonconvertible)
Common stock: rights offering Convertible debentures Factoring
Section B
Boudoir's Inc. Timberland Power & Light Ripe and Fresh Canning Company Piper Pickle Company Copper Mountain Mining Company Bull Gator
Saloon and Dance Hall Golden Gate Aircraft Corporation Schooner Yachts Teller Pen Corporation
Financing MethodCompanyReasoning
1. Leasing arrangementsBoudoir's Inc.The ... Show more content on Helpwriting.net ...
Another option is the issuing of preferred stock, the company's common stock is already overvalued in the market; therefore, sourcing additional
capital through common stock might result to lower proceeds. Common stock: rights offeringGolden Gate Aircraft CorporationIssuing additionaldebt to
finance the company expansion would worsen the company's debt ratio as it is already more than average. The company envisions to be profitable by
raising capital from existing stockholders by issuing common stock through rights offering. Convertible debenturesTeller Pen CorporationThe
company's leverage ratio is 28% – 72% of its assets are financed by common equity and the company was profitable in the last reporting period. The
company should easily raise additional funds from creditors and a convertible debenture will be an appealing venture for creditors who would want to
purchase stocks of the company in the future. FactoringRipe and Fresh Canning CompanyThe company's credit terms are 60–day, but it needs to pay
its purchases within 30 days after purchase. Factoring would provide a short–term solution to reduce the gap between average collection and payment
periods.
Answers:
Leasing arrangementBoudoir's, Inc.The company can negotiate for a lease to own arrangements for the new building with a builder/contractor.
Long term bondsTimberland Power & LightGiven that the maximum long term debt

Sources of Business Finance
Q–1. Discuss about different Sources of Business Finance.
Different Sources of Business Finance
Business is concerned with the production and distribution of goods and services for the satisfaction of needs of society. For carrying out various
activities, business requires money. Finance, therefore, is called the life blood of any business. A business cannot function unless adequate funds are
made available to it. The initial capital contributed by the entrepreneur is not always sufficient to take care of all financial requirements of the
business. A business person, therefore, has to look for different other sources from where the need for funds can be met. A business can raise funds
from various sources. Each of the sources has ... Show more content on Helpwriting.net ...
Further, through their right to vote, these shareholders have a right to participate in the management. However, equity shares also carry more risk.
2. Preference Shares
The capital raised by issue of preference shares is called preference share capital. The preference shareholders enjoy a preferential position over
equity shareholders in two ways: (i) receiving a fixed rate of dividend, out of the net profits of the company, before any dividend is declared for
equity shareholders; and (ii) receiving their capital after the claims of the company's creditors have been settled, at the time of liquidation. In other
words, as compared to the equity shareholders, the preference shareholders have a preferential claim over dividend and repayment of capital.
Preference shares have some characteristics of both equity shares and debentures. Preference shareholders generally do not enjoy any voting rights.
Investments in these shares are safe, and a preference shareholder also gets dividend regularly.
3. Debentures
Debentures are an important instrument for raising long term debt capital. Whenever a company wants to borrow a large amount of fund for a long
but fixed period, it can borrow from the general public by issuing loan certificates called Debentures.
A company can raise funds through issue of debentures, which bear a fixed rate of interest. A debenture is issued under the common

Disadvantages Of Life Insurance
INVESTMENT AVENUES 1. Life Insurance Life insurance is a contract for payment of a sum of money to the person assured (or to the person
entitled to receive the same) on the happenings of event insured against. Usually the contract provides for the payment of an amount on the date of
maturity or at specified dates at periodic intervals or if unfortunate death occurs. Among other things, the contracts also provide for the payment of
premium periodically to the corporation by the policy holders. Life insurance eliminates risk. The major advantages of life insurance are given below:
пѓ Protection Saving through life insurance guarantees full protection against risk of death of the saver. The full assured sum is paid, whereas in other
schemes... Show more content on Helpwriting.net ...
The maturity period may range from 5 years to 10 years in India. They may be redeemed in installments. Redemption is done through a creation of
sinking fund by the company. A trustee Incharge of the fund buys the debentures either from the market or owners. Creation of the sinking fund
eliminates the risk of facing financial difficulty at the time of redemption because redemption requires huge sum. Buy back provisions help the
company to redeem the debentures at a special price before the maturity date. Usually the special price is higher than the par value of the debenture.
Indenture It is a trust deed between the company issuing debenture and the debenture trustee who represents the debenture holders. The trustee takes
the responsibility of protecting the interest of the debenture holders and ensures that the company fulfills the contractual obligations. Financial
institutions, banks, insurance companies or firm attorneies act s trustees to the investors. In the indenture the terms of the agreement, description of
debentures, rights if the debenture holders, rights of the issuing company and the responsibilities of the company are specified clearly. Debentures are
classified on the basis of the security and convertibility

Stock Market and Cost
CHRIST UNIVERSITY BANGALORE IV BBA B ASSIGNMENT DATE OF SUBMISSION: 25.02.2011
– FRIDAY
1.a) X Ltd. issues Rs.50,000 8% debentures at par. The tax rate applicable to the company is 50%. Compute the cost of debt capital. b) Y Ltd.
issues Rs.50,000 8% debentures at a premium of 10%. The tax rate applicable to the company is 60%. Compute cost of debt capital. c) A Ltd. issues
Rs.50,000 8% debentures at a discount of 5%. The tax rate is 50%, Compute the cost of debt capital. d) B Ltd. issues Rs.1,00,000 9% debentures at a
premium of 10%. The costs of floatation are 2%. The tax rate ... Show more content on Helpwriting.net ...
B
13. The following is the capital structure of Saras Ltd. as on 31–12–2005. | Rs.| Equity Shares–––20,000 shares of Rs. 100 each| 20,00,000| 10%
Preference Shares of Rs.100 each| 8,00,000| 12% Debentures | 12,00,000| Total| 40,00,000|
The market price of the company's share is Rs.110 and it is expected that a dividend of Rs.10 per share would be declared after 1 year. The dividend
growth rate is 6%. 1) If the company is in the 50% tax bracket, compute the weighted average cost of capital.
Assuming that in order to finance an expansion plan, the company intends to borrow a fund of Rs.20 lakhs bearing 14% rate of interest, what will be
the company's revised weighted average cost of capital? This financing decision is expected to increase the dividend from 6% to 9%.

Ch02 Sm Leo 10e
Solutions Manual to accompany Company Accounting 10e prepared by Ken Leo John Hoggett John Sweeting Jeffrey Knapp Sue McGowan © John
Wiley & Sons Australia, Ltd 2015 Chapter 2 – Financing company operations REVIEW QUESTIONS 1. Explain the nature of a share. Distinguish
between an ordinary share and a preference share. Basically, a share represents ownership of a portion of the share capital of a company. Also note
the discussion in Chapter 1 of the text concerning the relationship between limited liability and the amount paid up on a share. The differences
between ordinary and preference shares are determined by the terms of issue. A company has the right to issue preference shares, but may only do so
either if there is a... Show more content on Helpwriting.net ...
If the share issue is fully subscribed, the underwriter will collect the commission and not have to do anything. 4.If a share issue is oversubscribed,
what action can be taken in relation to excess money received on application? Excess monies received on application for shares will be refunded to
the applicant. However where shares are issued on a partly paid basis, the excess can be used as an offset in reducing allotment money due and in
payment of any future calls, provided the company's constitution and the terms of the prospectus allow for this treatment. 5.When can a company
forfeit its shares? What happens to money already paid by the holder of those shares? A company can forfeit its shares provided the rules for forfeiture
are in the company's constitution. The rules usually specify that shares would be forfeited for non–payment of calls. Where shares are forfeited, the
company can, depending on the constitution, retain the funds already paid on the forfeited shares in which case the Forfeited Shares account will be
considered a reserve and part of equity. Alternatively, the forfeited shares can be reissued and the amount received, less the costs of forfeiture and
reissue of shares, may then be refunded to the former shareholders. In this case, the Forfeited Shares account is a liability. 6.How should a company
account for the legal costs of formation? Should the accounting treatment be the same as that for underwriting and other share issue

Csr Ltd. : Business Nature And Other Issues
Abstract Company is considered as an association where member shares a common purpose and unites for focusing their various talents to achieve
declared goals. CSR Ltd. is an Australian industrial company which manufactures building products along with this it also has an investment in
Tomago Aluminium Smelter. CSR Ltd. is a publicly traded company. In this study capital rising options of Jonson P/L is discussed along with
business nature and other issues of CSR Ltd. Part: A Introduction A company is a company which formed and registered under the specific
company act and a company will be treated as an invisible, artificial person, intangible, legal entity, perpetual succession, created by law and a
common seal. A company is never affected by death, insolvency or insanity of its individual member. Company is considered as an association
where member shares a common purpose and unites for focusing their various talents to achieve declared goals. There are two types of Company,
public limited company and private limited company. Share of public limited company is traded publicly but the share of private limited company is
not traded publicly. A group of people take the initiative of forming a public limited company and after registration initiators raised capital through
different procedure. Raising capital is a very big challenge for the initiator of the public limited company. After completing all necessary formalities,
company offers its shares to the public to

Mid-Texas Healthcare System: A Case Study
A debenture is "an unsecured bond, and as such, it has no lien against specific property as security for the obligation. For example, Mid–Texas
Healthcare System has $5 million of debentures outstanding. These bonds are not secured by real property but are backed instead by the
revenue–producing power of the corporation" (Gapenski, 2008, p.345). Debenture holders are, "therefore, general creditors whose claims, in the event
of bankruptcy, are protected by property not otherwise pledged. In practice, the use of debentures depends on the nature of the firm's assets and general
credit strength" (Gapenski, 2008, p. 345).
f) Subordinate debenture has a claim on assets in the event of bankruptcy only after senior debt has been paid off. In

Managing Financial Resources and Decisions
Executive summary This report is to propose an appropriate capital structure for Xpresso Delight Limted's business expansion with the minimum
amount of capital as US$ 30 million. In order to achieve that goal, firstly, it is going to identify the sources of finance available for the business as
debt financing which include loans, debentures and bonds; and equity financing, which includes common shares, preference shares and retained
profit. It is also to discuss advantages & disadvantages of each source, as well as to assess the implications of these different sources related to risk,
legal, financial and dilution of control and bankruptcy. Based on those analyses, it is to select the appropriate sources of finance for the... Show more
content on Helpwriting.net ...
Therefore, there are two principal sources of finance available to Xpresso Limited including debt and equity financing. 4.1.1. Debt financing: In
regards to debt financing, the simplest meaning is borrowing money on credit with a promise to repay the amount borrowed, plus interest18. There are
many types of debt financing, including borrowing from banks in terms of loans; or borrowing from investors in terms of debentures, bonds 4. 4.1.1.1.
Loans: A loan is a financial transaction in which one party– the lender – agrees to give another party – the borrower an amount of money which must
be paid back in full16. With a good finance profile and the support of Vietnam government pro–business policies, it is easier for Xpresso Limited to
borrow from commercial banks such as Vietcombank, VietinBank and so on. For example, the supportive interest rate of loans in Vietnam at present
is fluctuating between 5 and 6 percent per year14, therefore if Xpresso Limited. borrows US$ 10,000, the interest it has to pay back will be between
US$ 500 and US$ 600. 4.1.1.2. Debentures: It is a channel for Xpresso to mobilize capital from investors setting out the terms of loans, backed by its
reputation but not collateral12. Investors can be individuals, Vietnam and foreign

Mgm Harvard Business School Accounting Case
1.Effective Interest Rate on the new 10% debentures = 14.318%
For the 10% debentures, the market value of 1 share is $19.5 (given)
The equivalent of this is a cash offer of $3/share and a 10% subordinated debenture of face value of $23.
So the PV (10% subordinated debentures with FV $23) = $19.5 – $3 = $16.5
The effective interest rate (yield) on the above is that interest rate 'r' that gives the following
PV (Per period payment of ($23*5% i.e. $1.15) over 40 periods @ r)
+ PV ($23 paid 40 periods hence with a return of r)
$16.5
1.15*(1 – (1/(1+r)^40))/r + 23/(1+r)^40 = 16.5
Solving for r in the above equation we get 14.318% as the effective interest rate.
Similarly, Effective Interest Rate on the old 5%... Show more content on Helpwriting.net ...
The discount and ending liability for the 5% convertible debentures are calculated as follows. The market value = .45875 * $30,010 = $13,767. The
remaining amount is the discount.
Bond closed @.45875 of par$13,767.09 Discount = 1–.458750.54125$16,242.91 $30,010.00
The new earnings per share number can be calculated as follows.
Pre–Tax earnings in question 3 = $551,869
One–time gain = 13,348,000

Additional interest expense for 2 periods = 855.7 +857.3 = $1,713,000
Reduced interest expense for 5% bonds = 863.4 + 870.4 = $1,733,800
New Pre–tax Net Income = 551,869 +13,348,000 – 1,713,000 + $1,733,800 = 13,920,669
After tax Net income = 13,920,669 *(1–0.48) = $7,238,748
# shares outstanding = 5,321,295 shares (from q3)
Net Income = 7,238,748/5,321,295 = $1.36/share (mainly from the one time gain on the bond exchange)
6.From the above tables TABLE 2 (new 10% subordinated debentures) and TABLE 3 (existing 5% convertible debentures) the present values of the
exchanged 10% subordinated debentures and the existing 5% convertible debentures are obtained.
PV (Original 5% convertible debentures) = $30,10 (thousands)
PV (New 10% subordinated debentures) = $16,662 (thousands)
7.The following tables show the Debt/Equity Ratios before and after both exchanges based on book value of debt. As it is observed, the transactions
did not significantly alter the

A Company Is A Separate Legal Entity
The concept of a company being a separate legal entity is the most striking illustration in separating the company from its owners. A paramount
principle of corporate law is that no shareholder or member of a company is made liable for the obligations incurred by such incorporations A
company is different from its members in the eyes of law. In continuations to this the opposite also holds true in the sense that neither can the
company be held liable for the acts of its members. It is a fundamental distinction that a company is distinct from its members. The words, "corporate
entity is not imaginary or fictitious but quite real, whereas corporate personality is a fiction whose origin is to be found in the psychological
tendency towards personification" gives an idea that the legal doctrine of corporate personality was built around the idea of a sovereign grant of
certain attributes of personality to a definable group, which was engaged in an enterprise. When a company is incorporated it is treated as a separate
legal entity distinct from its promoters, directors, members, and employees, which confers the benefit of not being responsible for the companies debt
on the members on the company. However even though a company is a separate legal entity and it attains the advantage of not laying the responsibility
of company's debt on the... Show more content on Helpwriting.net ...
Unlike partnership, a company is distinct from the members and is capable of enjoying rights and duties in its own capacity, which is not the same
as those of its members. As Lord Macnaughten in Solomon v Solomon & Co Ltd case quotes "the company is at law a different person altogether
from the subscribers and the company in law is not the agent of the subscriber or trustee for them. Nor are the subscribers as members liable, in any
shape or form, except to the extent and in manner provided by the

Long-Term Financing Measures

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