This document provides an overview of the different sources of corporate financing, including internally generated funds, equity issues, and debt issues. It defines key terms related to equity such as common stock, preferred stock, treasury stock, authorized shares, issued shares, and outstanding shares. It also discusses the characteristics of different types of debt such as secured vs. unsecured debt, callable bonds, and convertible securities. The document uses examples to illustrate equity terminology and scenarios involving debt conversions.
Let's today to know something about Dividend...... A dividend is an extra income to dividend holder which totally tax-free in hands of Receiver which is considered the source of income.
#WhatisDividend
Hello, everyone, this presentation concept is a dividend in the share market,many people asking me what is a dividend and what is dividend investing and how to choose dividend stocks.The dividend shares money and this money share with shareholder dividend are very important for investment point of view and dividend is a very good source for judge good stocks in share market and in this market. I hope this video helps you good luck.
This presentation covers the basics of Dividend, Ex-Dividend, Record Date, Ex-Date.
Dividends are when a company distributes a portion of its profits to its shareholders.
This ppt is prepared to make familiar with the dividend policy which includes Types of Dividend policy, Procedure for declaring dividend, Why do companies declare dividend
Microsoft Dividend Policy and Milestones of MicrosoftSivaditya Gali
Microsoft Dividend Policy and Milestones of Microsoft.
Disclaimer
“This is prepared simply for practicing presentation-skills and understanding “slideshare’s online platform.
All content is simply for the learning purpose.
We don’t claim accuracy or complete information. All information is presented just for overview.
Any inadvertent use of company name, images are unintentional. & if brought to notice, we will remove them.
Dividend Policies involve the decisions, whether-
To retain earnings for capital investment and other purposes; or
To distribute earnings in the form of dividend among shareholders; or
To retain some earning and to distribute remaining earnings to shareholders.
Let's today to know something about Dividend...... A dividend is an extra income to dividend holder which totally tax-free in hands of Receiver which is considered the source of income.
#WhatisDividend
Hello, everyone, this presentation concept is a dividend in the share market,many people asking me what is a dividend and what is dividend investing and how to choose dividend stocks.The dividend shares money and this money share with shareholder dividend are very important for investment point of view and dividend is a very good source for judge good stocks in share market and in this market. I hope this video helps you good luck.
This presentation covers the basics of Dividend, Ex-Dividend, Record Date, Ex-Date.
Dividends are when a company distributes a portion of its profits to its shareholders.
This ppt is prepared to make familiar with the dividend policy which includes Types of Dividend policy, Procedure for declaring dividend, Why do companies declare dividend
Microsoft Dividend Policy and Milestones of MicrosoftSivaditya Gali
Microsoft Dividend Policy and Milestones of Microsoft.
Disclaimer
“This is prepared simply for practicing presentation-skills and understanding “slideshare’s online platform.
All content is simply for the learning purpose.
We don’t claim accuracy or complete information. All information is presented just for overview.
Any inadvertent use of company name, images are unintentional. & if brought to notice, we will remove them.
Dividend Policies involve the decisions, whether-
To retain earnings for capital investment and other purposes; or
To distribute earnings in the form of dividend among shareholders; or
To retain some earning and to distribute remaining earnings to shareholders.
Fundamental of Corporate Finance slideshareYin Sokheng
The objective of the course is to provide an understanding of both the theory of corporate finance fundamentals and how it applies to the “real” world. The main focus of this course is on the corporate financial manger and how he/she reaches decisions. We will cover many issues that are important to a modern financial manager including various advance topics in corporate finance fundamentals such as the essential concepts and understanding of the uses of financial statements and cash flows, ratio analysis, financial planning and growth, time value of money, bonds and stocks valuation, and project valuation.
Class assignment on an introduction to corporate finance which includes the following topics-
1. What is corporate finance?
2. Finance in the organizational structure of a firm
2.1 organization of finance function
2.2 financial manager
3. Finance functions
3.1 executive finance function
3.2 routine finance function
4. Goals of corporate finance
4.1 profit maximization
4.2 limitations of profit maximization
4.3 wealth maximization
4.4 limitations of wealth maximization
5. Corporate finance and related disciplines
5.1 relationship with economics
5.2 relationship with accounting
5.3 relationship with mathematics
6. The agency problem
6.1 agency
6.2 agency problems between shareholders and managers
6.3 resolving conflicts between shareholders and managers
6.4 agency problems between shareholders and creditors
6.5 resolving conflicts between shareholders and creditors
7. Development of corporate finance
Hope you guys find it helpful.
Introduction, Structure, Roles, Significance, Difference between Primary and Secondary Markets and Instruments are some of the major topics I am going to cover in this presentation.
Positioning Your Start-Up For Success: Advice to Entrepreneurs Forming a CompanyWilmerHale
Explores choosing an entity, where to incorporate, IP protection, employee and independent contractor relationships, issuing and vesting of equity, issued and reserved shares, and Section 83(b) elections.
2. 14
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Introduction to Corporate
Financing
Firms have three sources of cash from which to
finance their activities.
This chapter provides an overview of debt,
equity, and internally generated funds.
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Financial Markets
Competition in financial markets is fierce--
much more so than in product markets.
Few protected niches (ex: cannot patent the
structure of a new security)
Securities sell for their true values
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Corporate Financing
Firms have three broad sources of cash.
Internally generated funds
New equity issues
New debt issues
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Internally Generated Funds
Historical sources of funds for FedEx
1995-2010
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Why Internal Funds?
Managers prefer to reinvest internal funds for a
number of reasons:
Cost of issuing securities
New equity announcement implications
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Corporate Financing
What happens when the firm cannot finance all
of its activities from plowed-back funds?
Financial Deficit
New Equity Issues
New Debt Issues
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Equity Issues
Most corporations are too large to be owned by
one investor; therefore they issue stock to many
investors.
Example:
Dow is owned by 650,000 different investors. If it has
1.167 billion shares outstanding, how much of Dow does an
investor who holds one share own?
The investor owns: , or 0.000000085% of Dow
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Equity Terminology
Treasury stock
• Stock that has been repurchased by the company and held in its
treasury.
Issued shares and Outstanding Shares
• Shares that have been issued by the company; shares that have
been issued by the company and are held by investors.
Authorized Share Capital
• The maximum number of shares that the company is permitted to
issue without additional shareholder approval.
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Equity Terminology: Example
Imagine a firm has 100 million shares currently trading on
the NYSE. The firm issues 20 million new shares, and
repurchases 5 million shares one month later.
What is the total change in treasury stock?
What is the total change in the number of issued shares?
What is the total change the number of shares outstanding?
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Equity Terminology
When a firm issues new equity, it records each
new share in its books at par value.
Additional Paid-in Capital
• The difference between the issue price and the par
value of a stock
Retained Earnings
• Earnings not paid out as dividends
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Equity Terminology: Example
Suppose a firm has recently issued 10 million new shares at
$15 per share; the par value of each is $1.50.
What is the value of additional paid-in capital (APIC)?
(10,000,000 $APIC = ´ 15) -(10,000,000´$1.50)
13. Represents the total amount contributed directly by shareholders
when the firm issued new stock, and contributed indirectly when it
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Net Common Equity
Net Common
Equity =
plowed back part of its earnings
Par
Value + Additional
Paid-in Capital + Retained
Earnings - Share
Repurchases
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Net Common Equity: Example
What is the book value per share of equity for a firm with
$1 million in net common equity; 50,000 in authorized
share capital; 25,000 shares issued; and 20,000 shares
outstanding?
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Corporate Ownership
A corporation is owned by its common
stockholders.
Owners are entitled to:
Profits
Control of the firm
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Corporate Ownership
Shareholders exercise control over the firm by voting for its
board of directors.
• Majority Voting
• Voting system in which each director is voted on separately
• Cumulative Voting
• Voting system in which all votes that one shareholder is
allowed to cast can be cast for one candidate for the board
of directors
• Proxy Contest
• Takeover attempt in which outsiders compete with
management for shareholders’ votes
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Corporate Ownership: Example
A shareholder owning 100 shares of stock is voting for the
board of directors who are elected by cumulative voting. How
many votes did the shareholder cast for Director 'A' if four
directors are to be elected and the shareholder cast his/her
maximum number of votes for 'A'?
400
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Corporate Debt
When issuing debt, companies promise to make payments
and repay principal. But they have limited liability; debt
is not always repaid.
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Debt Characteristics
Interest rate fluctuations
Coupon vs. Zero-coupon Bonds
Prime Rate
LIBOR
Would you expect the price of a 10-year floating-rate bond
to be more or less sensitive to changes in interest rates
than the price of a 10-year fixed-rate bond?
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Debt Characteristics
Funded and Unfunded Debt
• Debt with more than 1 year remaining to maturity; debt due
in less than one year.
Sinking Fund
• A fund established to retire debt before maturity.
Callable Bond
• A bond that may be repurchased by a firm before maturity
at a specified call price.
If interest rates rise, would holders of callable bonds expect
the firm to buy back the debt?
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Debt Characteristics
Seniority
Subordinated Debt
Security
Secured Debt
Currency and Country of Origin
Eurodollars
Eurobond
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Debt Characteristics
Public vs. Private Placements
Protective Covenants
• Restrictions on a firm to protect bondholders
Leases
• Long-term rental agreements
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Convertible Securities
Give investors the option to alter their investments
if they so choose.
Warrant
• The right to buy shares from a company at a stipulated
price before a set date
Convertible Bond
• A bond that the holder may exchange for a specified
amount of another security
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Convertible Securities: Example
An investor owns a bond selling for $1,000. This bond can
be converted to 20 shares of stock that are currently selling
for $55 per share. Should the investor convert his bond into
shares?
Without conversion:
With conversion:
Value of Investment =( 20´$55) =$1,100
Editor's Notes
Chapter 14 Learning Objectives
Explain why managers should assume that the securities they issue are fairly priced.
Summarize the changing ways that U.S. firms have financed their growth.
Interpret shareholder equity accounts in the firm’s financial statements.
Describe voting procedures for the election of a firm’s board of directors and other matters.
Describe the major classes of securities sold by the firm.
Chapter 14 Outline
Financial Market Competition
Corporate Financing
3 Sources of Cash
Internally Generated Funds
Why Internal Funds?
Equity
Equity Terminology
Understanding Stock Issues
Net Common Equity
Corporate Ownership
Two Owner Entitlements:
Profits
Corporate Control
Voting Procedures
Majority vs. Cumulative Voting
Proxy Contests
Equity
Preferred Stock
Advantages & Disadvantages
Corporate Debt
Limited Liability & Default Risk
Debt Characteristics
Interest Rate Fluctuations
Funded vs. Unfunded Debt
Sinking Funds
Callable Bonds
Subordinated Debt
Secured Debt
Foreign Debt
Public vs. Private Placements
Protective Covenants
Leases
Convertible Securities
Warrants
Convertible Bonds
Unlike in product markets, there are few protected niches in financial markets.
Example: You can’t patent the design of a new security.
Financial markets are highly efficient and securities generally sell for their true values:
True value – a price that incorporates all the information currently available to investors
Internally generated funds – Cash reinvested in the firm: depreciation plus earnings not paid out as dividends.
Just as with most firms, FedEx’s largest source of cash by far came from internally generated funds.
The announcement of a new equity issue is usually bad news for investors.
Can be perceived as an attempt by management to sell overpriced stock.
Raising capital internally avoids the costs and bad omens associated with new equity issues.
Financial Deficit – The difference between the cash a company needs and the amount generated internally.
To fix this deficit, firms either issue new equity or issue new debt.
Treasury Stock –Stock that has been repurchased by the company and held in its treasury.
Issued Shares – Shares that have been issued by the company.
Outstanding Shares – Shares that have been issued by the company and are held by investors.
Authorized Share Capital – Maximum number of shares that the company is permitted to issue without additional shareholder approval.
Par Value – Value of security shown in the company’s accounts.
Note: par value has little economic significance.
Additional Paid-in Capital – Difference between issue price and par value of stock.
Also called capital surplus
Retained Earnings – Earnings not paid out as dividends.
Net common equity - represents the total amount contributed directly by shareholders when the firm issued new stock, and indirectly when it plowed back part of its earnings.
Profits:
The shareholders are entitled to whatever profits are left over after the lenders have received their dues.
A portion of profits are usually paid out in dividends and the rest is plowed back into the firm.
Plowed back profits should allow the company to earn higher profits and pay higher dividends in the future.
Control of the firm:
Shareholders retain all residual rights of control over the operation of the firm
Majority Voting – Voting system in which each director is voted on separately.
Most companies use a system of majority voting.
Cumulative Voting – Voting system in which all votes that one shareholder is allowed to cast can be cast for one candidate for the board of directors.
Proxy Contest – Takeover attempt in which outsiders compete with management for shareholders’ votes.
Note: Corporations sometimes issue multiple classes of common stock, some with different voting rights than others.
Preferred Stock – Stock that takes priority over common stock in regards to dividends.
Net Worth – Book value of common stockholders’ equity plus preferred stock.
Advantages:
Dividends – Preferred stock dividends must be paid to shareholders before common shareholders can receive anything.
Tax Advantages – If one corporation buys another’s stock, only 30% of the dividends it receives is taxable.
Disadvantages:
Interest rate fluctuations – As interest rates rise, the present value of the preferred securities falls. This problem is solved with floating-rate preferred shares.
Floating-Rate Preferred – Preferred stock paying dividends that vary with short-term interest rates.
Limited Liability – The promise to repay a firm’s debt is not always kept.
The company has the right to default on the debt and to hand over the assets to the firm’s lenders.
A bond’s interest payment, its coupon, is usually fixed at time of issue.
The present value of the bond changes with fluctuations in the interest rate.
A zero coupon bond pays no regular payments; it simply makes a single payment at maturity.
Most loans carry a floating interest rate, usually tied to the prime rate or the LIBOR.
Prime Rate – Benchmark interest rate charged by banks.
LIBOR – London Interbank Offered Rate; the rate at which international banks lend to one another.
Funded Debt – Debt with more than 1 year remaining to maturity
Unfunded Debt – Debt due in less than one year.
Carried on the balance sheet as a current liability.
Sinking Fund – Fund established to retire debt before maturity.
When a sinking fund exists, investors are prepared to lend at a lower rate of interest.
Callable Bond – Bond that may be repurchased by a firm before maturity at a specified call price.
In the event of default, a subordinated lender gets repaid only after the firm’s general creditors are paid.
Subordinated Debt – Debt that may be repaid in bankruptcy only after senior debt is paid.
If a loan is backed by collateral (assets held as security for a loan), the loan is said to be secured.
Secured Debt – Debt that has first claim on specified collateral in the event of default.
Financial markets know few national boundaries; many U.S. firms often borrow abroad.
Eurodollars – Dollars held on deposit in a bank outside the United States.
Eurobond – Bond that is marketed internationally.
Public vs. Private Placements:
Publicly issued bonds are sold to anyone who wishes to buy, and are resold and traded in securities markets.
Private Placement – Sale of securities to a limited number of investors without a public offering.
Bondholders sometimes place restrictions on the company to prohibit it from taking unreasonable risks.
Protective Covenant – Restriction on a firm to protect bondholders.
Lease – Long-term rental agreement.
Warrant – Right to buy shares from a company at a stipulated price before a set date.
Convertible Bond – Bond that the holder may exchange for a specified amount of another security.