Stocks, or shares of stock, represent an ownership interest in a corporation. Bonds are a form of long-term debt in which the issuing corporation promises to pay the principal amount at a specific date.
Bonds, preferred stocks and common stocksSalman Irshad
The document discusses various types of bonds, preferred stocks, and common stocks. It begins by defining basic bond terms like principal amount, coupon rate, maturity date, and bond ratings. It then describes different types of bonds such as secured bonds (mortgage, equipment trust), unsecured bonds (debentures, subordinated), and bonds classified by coupon payments (zero coupon, fixed-rate, floating-rate) or issuer (government, municipal, corporate). The document also discusses bond retirement methods like sinking funds, serial bonds, and call provisions.
Bonds are a type of debt security where the issuer owes the bond holders interest payments and repayment of principal at maturity, with interest typically paid at fixed intervals. Bond holders are creditors who provide funds to the issuer in exchange for these payments. The major types of bonds include government bonds, corporate bonds, high yield bonds, zero coupon bonds, and convertible bonds.
This document discusses various forms of long term debt financing for companies. It describes capital markets which facilitate the trade of securities like stocks and bonds. Private placements involve direct selling of bonds to a small number of qualified institutional investors like banks and insurance companies. Commercial papers are short term unsecured notes issued by large companies and financial institutions with maturities of up to nine months. Corporate bonds are longer term debt instruments issued by corporations to raise funds. Medium term notes have maturities between 5-10 years and combine aspects of commercial papers and corporate bonds.
Preferred stocks blend characteristics of stocks and bonds. They provide higher yields than common stocks through fixed dividend payments, and have higher claims on company assets than common shares. Preferred stocks offer greater assurances of receiving dividend payments than common stocks. Companies issue preferred shares as a relatively cheap way to raise capital, for balance sheet management purposes, and to maintain flexibility in dividend payments. Preferred stocks historically have offered higher yields than other asset classes like bonds and money market accounts, providing potential portfolio diversification benefits due to their low correlations with other assets.
The document discusses various types of equity financing options including equity shares, initial public offerings (IPOs), private placements, and direct offerings. It also describes the book building process for determining the price of shares during an IPO. Key points include that equity shares represent fractional ownership of a company and provide voting rights to shareholders, but no fixed rate of return or obligation to pay dividends. The book building process involves collecting bids from investors over a period of time to help set the issue price.
Bonds, preferred stocks and common stocksSalman Irshad
The document discusses various types of bonds, preferred stocks, and common stocks. It begins by defining basic bond terms like principal amount, coupon rate, maturity date, and bond ratings. It then describes different types of bonds such as secured bonds (mortgage, equipment trust), unsecured bonds (debentures, subordinated), and bonds classified by coupon payments (zero coupon, fixed-rate, floating-rate) or issuer (government, municipal, corporate). The document also discusses bond retirement methods like sinking funds, serial bonds, and call provisions.
Bonds are a type of debt security where the issuer owes the bond holders interest payments and repayment of principal at maturity, with interest typically paid at fixed intervals. Bond holders are creditors who provide funds to the issuer in exchange for these payments. The major types of bonds include government bonds, corporate bonds, high yield bonds, zero coupon bonds, and convertible bonds.
This document discusses various forms of long term debt financing for companies. It describes capital markets which facilitate the trade of securities like stocks and bonds. Private placements involve direct selling of bonds to a small number of qualified institutional investors like banks and insurance companies. Commercial papers are short term unsecured notes issued by large companies and financial institutions with maturities of up to nine months. Corporate bonds are longer term debt instruments issued by corporations to raise funds. Medium term notes have maturities between 5-10 years and combine aspects of commercial papers and corporate bonds.
Preferred stocks blend characteristics of stocks and bonds. They provide higher yields than common stocks through fixed dividend payments, and have higher claims on company assets than common shares. Preferred stocks offer greater assurances of receiving dividend payments than common stocks. Companies issue preferred shares as a relatively cheap way to raise capital, for balance sheet management purposes, and to maintain flexibility in dividend payments. Preferred stocks historically have offered higher yields than other asset classes like bonds and money market accounts, providing potential portfolio diversification benefits due to their low correlations with other assets.
The document discusses various types of equity financing options including equity shares, initial public offerings (IPOs), private placements, and direct offerings. It also describes the book building process for determining the price of shares during an IPO. Key points include that equity shares represent fractional ownership of a company and provide voting rights to shareholders, but no fixed rate of return or obligation to pay dividends. The book building process involves collecting bids from investors over a period of time to help set the issue price.
This chapter discusses long-term financing options for corporations including common stock, corporate long-term debt, and preferred stock. It notes that internally generated cash flows dominate as a source of financing for Canadian firms. When firms spend more than they generate internally, they finance the gap through new sales of debt and equity. However, net new equity issues are dwarfed by new sales of debt. The chapter outlines the key characteristics and tax implications of the different long-term financing instruments.
What is the difference between common stock and preferred stock? And Financia...Awais Sandhu
What is the difference between common stock and preferred stock?
Financial statement
M. Awais Sandhu
University of agriculture Fsd
MBA 3.5y
03007271202
This document discusses various types of equity instruments. An equity instrument refers to a legally binding document that serves as evidence of ownership in a company, such as a share certificate. Common types of equity instruments include common stock, convertible debentures, preferred stock, depository receipts, and transferable subscription rights. Common stock allows shareholders to own part of the company and have voting rights proportional to their shares. Convertible debentures function similarly to bonds but can be converted to common stock. Preferred stock entitles shareholders to repayment of capital before common shareholders. Depository receipts provide the same rights as shares in a listed company. Transferable subscription rights allow shareholders to sell or transfer rights to purchase additional shares.
Debt - Basics of Debt and Fixed Income BFSI academy
Basics of Bond
Characteristics of Bond
Indenture , Covenants
Secured | Unsecured
Bond Markets
Categories of Bonds
Bond calculations
Callable , Putable Bonds
Securitisation , structured debt
The document organizes various methods for investing financial assets into direct investing, indirect investing, and different asset classes. Direct investing involves individuals purchasing securities directly, while indirect investing involves purchasing shares of investment companies that hold portfolios of securities. The document further breaks down the different asset classes an investor may choose from, including money market securities, fixed income securities, equity securities, and derivative securities.
This document discusses various financial instruments and services. It defines different types of equity shares, preference shares, bonds, debentures, commercial paper and treasury bills. It also describes various fund-based financial services including working capital loans, term loans, venture capital, and non-fund based services such as merchant banking and credit ratings. Retail financing services for individuals include deposits, loans, insurance and mutual funds. Financial services for corporations include underwriting, portfolio management, mergers and acquisitions. The informal financial system consists of money lenders, community groups and local partnership firms.
This document defines and provides examples of different types of investments including stocks, bonds, mutual funds, real estate, and precious metals and stones. It discusses initial public offerings (IPO) which allow private companies to offer stock to the public. It also defines shares, bonds, debentures, fixed deposits, mutual funds, provident funds, and insurance as examples of financial instruments. Real estate investments can include residential homes, agricultural land, and commercial property. Precious objects for investment purposes include gold, silver, and precious stones. The document also presents the basic formula for personal finance that income minus expenditure equals savings.
The document discusses various aspects of financial markets. It defines a financial market as a mechanism that allows people to buy and sell financial securities and commodities. It then describes different types of financial markets including the money market, capital market, primary market, and secondary market. The document focuses on instruments and importance of the money market, discussing treasury bills, commercial paper, certificates of deposits, repurchase agreements, and banker's acceptances. It also covers capital markets, their importance, and instruments like equity shares, preference shares, bonds, and debentures.
Corporations often have two types of stocks: common and preferred. There are both advantages and disadvantages to each. Let’s say you have $10,000 to invest in a corporation that issues both common and preferred stock. Your main goal is to maximize the amount of dividends received. Which of the types of stock would you invest in? Explain your answer.
Preferred stock is a type of equity security that has characteristics of both debt and equity. It has a higher claim on assets and earnings than common stock, but is subordinate to bonds and other debt. Key features include: a fixed dividend that must be paid out before common dividends; no voting rights unless dividends are in arrears; and seniority over common stock in liquidation. Preferred stock comes in different classes with varying rights, and provides tax advantages for corporations.
Companies can raise capital through either debt or equity financing. Debt financing involves taking a loan that must be repaid with interest, while equity financing involves selling ownership stakes in the company. There are several pros and cons to each approach. Debt is generally easier to obtain but subjects the company to fixed repayment obligations, while equity does not require repayment but dilutes ownership and control of the company. The best financing structure depends on the specific needs and risks involved for each business.
Long term financing refers to raising funds for a period of more than 5 years to finance long term assets like plant, machinery, buildings, etc. The key sources of long term financing are equity shares, preference shares, debentures, term loans, internal accruals. Equity shares provide flexibility but dilute ownership, while preference shares are less risky but more expensive. Debentures and term loans are popular debt instruments that provide tax benefits but also repayment obligations and restrictions. Internal accruals have advantages of no dilution or issue costs but quantities are limited. Companies can raise long term funds through public offers, rights issues, private placements or venture capital/private equity.
This document discusses different types of stock and features of preferred stock. It defines common stock and preferred stock, with common stock representing ownership and voting rights, while preferred stock has fixed dividend payments but no voting rights. Key features of preferred stock include cumulative dividends where unpaid dividends must be paid before common dividends; participating features which allow preferred holders to receive additional dividends if common dividends increase; and call provisions, sinking funds, and conversion options for retirement or conversion of preferred stock. The document provides an overview of stock, dividends, and characteristics of different stock types.
Long term financing provides capital for periods over one year through equity like stock issuances or debt. It is used to finance fixed assets, permanent working capital needs, expansions, and large construction projects. Common stock represents ownership in a company and allows for transfer of shares. While stocks provide growth potential, the original investment is at risk and returns depend on company performance. Key financial terms for common stock include authorized shares, issued shares, par value, additional paid-in capital, retained earnings, and capital surplus which represent amounts paid beyond par value.
Stocks and bonds are two separate ways for a company to raise money in order to fund and expand their company’s operations. While issuing stocks a company is selling a piece of their company in exchange for money. Whenever a company issues a bond, it is issuing debt with an agreement to pay interest for the use of the money.
The document introduces various types of debt financing available to small businesses, including loans, bonds, and convertible debentures. It explains how debt financing works, the differences between debt and equity financing, factors considered in debt financing eligibility like credit ratings and collateral, and tips for applying for debt financing like comparing interest rates and checking prepayment terms. The document is published by LoanXpress, a company that provides corporate financing services.
The document discusses various investment alternatives including real estate, gold/silver, mutual funds, bonds, stocks, derivatives, and commodities. It provides brief descriptions of each type of investment, highlighting some key aspects. For example, it notes that real estate involves the purchase and sale of land and buildings, and gold/silver investment provides protection through diversification and potential for growth. The document also includes charts showing the percentage growth of different investment types on average each year.
This document discusses various sources of long-term finance for companies. It describes equity capital as money invested in a company through common stock that is not repaid but provides ownership. Preference shares provide preferential rights to dividends and capital return. Internal accruals from retained earnings and depreciation are also discussed. Term loans from banks have maturity periods over one year, while debentures are debt instruments where a company borrows money to repay later under defined terms. The sources of long-term finance discussed are equity capital, preference shares, internal accruals, term loans, and debentures.
This document provides an overview of debentures, including:
- Debentures are long-term debt instruments similar to bonds that provide loan capital to a company.
- There are different types of debentures like non-convertible, partly convertible, and fully convertible debentures.
- Debentures can be secured, with company assets as collateral, or unsecured.
- Key features include the face value, interest rate, maturity date, and redemption value.
Financial instruments can be equity-based, representing ownership, or debt-based, representing a loan. They are used by corporations to raise funds. Money market instruments are short-term investments under 1 year, like treasury bills, commercial paper, and certificates of deposit. Capital market instruments are long-term investments over 1 year, such as treasury notes, bonds, and stocks. Characteristics of different financial instruments include liquidity, maturity, safety, and yield.
This chapter discusses long-term financing options for corporations including common stock, corporate long-term debt, and preferred stock. It notes that internally generated cash flows dominate as a source of financing for Canadian firms. When firms spend more than they generate internally, they finance the gap through new sales of debt and equity. However, net new equity issues are dwarfed by new sales of debt. The chapter outlines the key characteristics and tax implications of the different long-term financing instruments.
What is the difference between common stock and preferred stock? And Financia...Awais Sandhu
What is the difference between common stock and preferred stock?
Financial statement
M. Awais Sandhu
University of agriculture Fsd
MBA 3.5y
03007271202
This document discusses various types of equity instruments. An equity instrument refers to a legally binding document that serves as evidence of ownership in a company, such as a share certificate. Common types of equity instruments include common stock, convertible debentures, preferred stock, depository receipts, and transferable subscription rights. Common stock allows shareholders to own part of the company and have voting rights proportional to their shares. Convertible debentures function similarly to bonds but can be converted to common stock. Preferred stock entitles shareholders to repayment of capital before common shareholders. Depository receipts provide the same rights as shares in a listed company. Transferable subscription rights allow shareholders to sell or transfer rights to purchase additional shares.
Debt - Basics of Debt and Fixed Income BFSI academy
Basics of Bond
Characteristics of Bond
Indenture , Covenants
Secured | Unsecured
Bond Markets
Categories of Bonds
Bond calculations
Callable , Putable Bonds
Securitisation , structured debt
The document organizes various methods for investing financial assets into direct investing, indirect investing, and different asset classes. Direct investing involves individuals purchasing securities directly, while indirect investing involves purchasing shares of investment companies that hold portfolios of securities. The document further breaks down the different asset classes an investor may choose from, including money market securities, fixed income securities, equity securities, and derivative securities.
This document discusses various financial instruments and services. It defines different types of equity shares, preference shares, bonds, debentures, commercial paper and treasury bills. It also describes various fund-based financial services including working capital loans, term loans, venture capital, and non-fund based services such as merchant banking and credit ratings. Retail financing services for individuals include deposits, loans, insurance and mutual funds. Financial services for corporations include underwriting, portfolio management, mergers and acquisitions. The informal financial system consists of money lenders, community groups and local partnership firms.
This document defines and provides examples of different types of investments including stocks, bonds, mutual funds, real estate, and precious metals and stones. It discusses initial public offerings (IPO) which allow private companies to offer stock to the public. It also defines shares, bonds, debentures, fixed deposits, mutual funds, provident funds, and insurance as examples of financial instruments. Real estate investments can include residential homes, agricultural land, and commercial property. Precious objects for investment purposes include gold, silver, and precious stones. The document also presents the basic formula for personal finance that income minus expenditure equals savings.
The document discusses various aspects of financial markets. It defines a financial market as a mechanism that allows people to buy and sell financial securities and commodities. It then describes different types of financial markets including the money market, capital market, primary market, and secondary market. The document focuses on instruments and importance of the money market, discussing treasury bills, commercial paper, certificates of deposits, repurchase agreements, and banker's acceptances. It also covers capital markets, their importance, and instruments like equity shares, preference shares, bonds, and debentures.
Corporations often have two types of stocks: common and preferred. There are both advantages and disadvantages to each. Let’s say you have $10,000 to invest in a corporation that issues both common and preferred stock. Your main goal is to maximize the amount of dividends received. Which of the types of stock would you invest in? Explain your answer.
Preferred stock is a type of equity security that has characteristics of both debt and equity. It has a higher claim on assets and earnings than common stock, but is subordinate to bonds and other debt. Key features include: a fixed dividend that must be paid out before common dividends; no voting rights unless dividends are in arrears; and seniority over common stock in liquidation. Preferred stock comes in different classes with varying rights, and provides tax advantages for corporations.
Companies can raise capital through either debt or equity financing. Debt financing involves taking a loan that must be repaid with interest, while equity financing involves selling ownership stakes in the company. There are several pros and cons to each approach. Debt is generally easier to obtain but subjects the company to fixed repayment obligations, while equity does not require repayment but dilutes ownership and control of the company. The best financing structure depends on the specific needs and risks involved for each business.
Long term financing refers to raising funds for a period of more than 5 years to finance long term assets like plant, machinery, buildings, etc. The key sources of long term financing are equity shares, preference shares, debentures, term loans, internal accruals. Equity shares provide flexibility but dilute ownership, while preference shares are less risky but more expensive. Debentures and term loans are popular debt instruments that provide tax benefits but also repayment obligations and restrictions. Internal accruals have advantages of no dilution or issue costs but quantities are limited. Companies can raise long term funds through public offers, rights issues, private placements or venture capital/private equity.
This document discusses different types of stock and features of preferred stock. It defines common stock and preferred stock, with common stock representing ownership and voting rights, while preferred stock has fixed dividend payments but no voting rights. Key features of preferred stock include cumulative dividends where unpaid dividends must be paid before common dividends; participating features which allow preferred holders to receive additional dividends if common dividends increase; and call provisions, sinking funds, and conversion options for retirement or conversion of preferred stock. The document provides an overview of stock, dividends, and characteristics of different stock types.
Long term financing provides capital for periods over one year through equity like stock issuances or debt. It is used to finance fixed assets, permanent working capital needs, expansions, and large construction projects. Common stock represents ownership in a company and allows for transfer of shares. While stocks provide growth potential, the original investment is at risk and returns depend on company performance. Key financial terms for common stock include authorized shares, issued shares, par value, additional paid-in capital, retained earnings, and capital surplus which represent amounts paid beyond par value.
Stocks and bonds are two separate ways for a company to raise money in order to fund and expand their company’s operations. While issuing stocks a company is selling a piece of their company in exchange for money. Whenever a company issues a bond, it is issuing debt with an agreement to pay interest for the use of the money.
The document introduces various types of debt financing available to small businesses, including loans, bonds, and convertible debentures. It explains how debt financing works, the differences between debt and equity financing, factors considered in debt financing eligibility like credit ratings and collateral, and tips for applying for debt financing like comparing interest rates and checking prepayment terms. The document is published by LoanXpress, a company that provides corporate financing services.
The document discusses various investment alternatives including real estate, gold/silver, mutual funds, bonds, stocks, derivatives, and commodities. It provides brief descriptions of each type of investment, highlighting some key aspects. For example, it notes that real estate involves the purchase and sale of land and buildings, and gold/silver investment provides protection through diversification and potential for growth. The document also includes charts showing the percentage growth of different investment types on average each year.
This document discusses various sources of long-term finance for companies. It describes equity capital as money invested in a company through common stock that is not repaid but provides ownership. Preference shares provide preferential rights to dividends and capital return. Internal accruals from retained earnings and depreciation are also discussed. Term loans from banks have maturity periods over one year, while debentures are debt instruments where a company borrows money to repay later under defined terms. The sources of long-term finance discussed are equity capital, preference shares, internal accruals, term loans, and debentures.
This document provides an overview of debentures, including:
- Debentures are long-term debt instruments similar to bonds that provide loan capital to a company.
- There are different types of debentures like non-convertible, partly convertible, and fully convertible debentures.
- Debentures can be secured, with company assets as collateral, or unsecured.
- Key features include the face value, interest rate, maturity date, and redemption value.
Financial instruments can be equity-based, representing ownership, or debt-based, representing a loan. They are used by corporations to raise funds. Money market instruments are short-term investments under 1 year, like treasury bills, commercial paper, and certificates of deposit. Capital market instruments are long-term investments over 1 year, such as treasury notes, bonds, and stocks. Characteristics of different financial instruments include liquidity, maturity, safety, and yield.
The document discusses long-term financing, which refers to loans and financial obligations lasting over one year. Long-term debt for companies includes any financing or leasing obligations due in over 12 months. Characteristics of long-term debt include loan periods exceeding 12 months, being secured by collateral like property, relatively low fixed interest rates, and higher risk for companies with high debt-to-equity ratios. Common sources of long-term financing are share capital, retained earnings, debentures, term loans, and venture funding. The document also describes various long-term financing instruments like common stock, preferred stock, bonds, and debentures.
This document discusses sources of financing for non-government organizations. It outlines both short-term and long-term financing options including personal investment, friends and family, venture capital, business incubators, loans, bonds, and issuing stocks. Short-term options include accounts payable, lines of credit, commercial paper, and letters of credit. Long-term options include loans, secured and unsecured bonds, convertible bonds, and preferred and common stocks. Proper financing is important as it can increase firm value, utilize funds effectively, maximize returns, minimize costs, provide liquidity and flexibility, and maintain shareholder control.
A bond is a form of loan issued by companies or governments to raise funds from investors. It obligates the issuer to pay interest regularly and repay the principal at maturity. Bondholders have a creditor relationship with the issuer rather than an ownership stake. While bonds offer fixed regular interest payments, they also carry more risk than equity since bondholders have a lower priority than shareholders in the event of bankruptcy.
This document discusses long term sources of finance for companies. It describes several types of long term financing sources including shares (equity shares and preference shares), retained earnings, debentures, public deposits, loans from financial institutions, lease financing (financial leases, operating leases, sale and lease back, leveraged leasing, direct leasing), venture capital financing, hire purchase financing, debt securitization, and international financing. Long term funds are used by companies to finance fixed assets and the permanent part of working capital in order to finance growth and expansion. The appropriate source of long term financing depends on factors like the nature of the business and the assets being purchased.
The document provides an introduction to bonds, including how they are issued, their key features and types. It defines a bond as a debt security where the issuer owes the holder principal plus interest. Bonds are issued through underwriting by banks or firms. Their main features include the coupon rate, maturity date and issuer. The riskiness of a bond depends on the issuer, with government bonds being lowest risk.
Debt refers to funds that a company owes to another entity that must be repaid within a specific term. Equity refers to funds raised by issuing shares to the public that can remain invested in the company long-term as ownership. Key differences are that debt is borrowed while equity is owned, debt carries obligation to repay while equity represents ownership, and debt has fixed regular interest payments while equity dividends are variable and irregular. Maintaining a balanced ratio between debt and equity, typically with equity twice that of debt, helps companies cover potential losses.
Financial instruments are financial contracts between institutional units that include a range of financial assets and liabilities. Some key types of financial instruments are deposits, special drawing rights (SDRs) issued by the IMF, borrowings, loans, shares and other equity, debentures or bonds, other accounts receivable and payable, financial derivatives like options and swaps, letters of guarantee, letters of credit, and financial commitments. Derivatives allow parties to exchange risks and can include options, forwards/futures, and swaps. Loans are evidenced by non-negotiable documents and can be short, medium, or long term. Shares represent ownership rights in enterprises and equity, while debentures or bonds are a form of
Bonds are debt instruments that pay interest to holders and repay the principal amount on maturity. They are issued by governments, municipalities, and corporations to raise funds. The key features of a bond include the principal/face amount, interest rate (coupon), maturity date, and coupon payment dates. The main types of bonds are government bonds, municipal bonds, mortgage-backed securities, corporate bonds, and zero-coupon bonds. Bond prices move inversely to interest rates and bondholders face risks such as interest rate risk, reinvestment risk, inflation risk, market risk, default risk, call risk, and liquidity risk.
The document discusses various aspects of financial markets, including money markets and capital markets. It defines a financial market as a mechanism that allows people to buy and sell financial securities and commodities. Money markets deal in short-term lending of less than 1 year, for safe and liquid assets. Capital markets facilitate long-term borrowing and lending for investments. Some common money market instruments discussed are treasury bills, commercial paper, certificates of deposits, repurchase agreements, and banker's acceptances. Capital market instruments include equity shares, preference shares, bonds, and debentures.
The document discusses financial markets and money markets. It defines a financial market as a mechanism for buying and selling financial securities and commodities. It notes that money markets deal in short-term lending of less than 1 year for instruments like treasury bills, commercial paper, certificates of deposits, repurchase agreements, and bankers acceptances. Capital markets are for longer term borrowing and lending through instruments like stocks, bonds, debentures, and preference shares.
The document discusses financial markets and money markets. It defines a financial market as a mechanism for buying and selling financial securities and commodities. It notes that money markets deal in short-term lending of less than 1 year for instruments like treasury bills, commercial paper, certificates of deposits, repurchase agreements, and bankers acceptances. The document also discusses capital markets, which facilitate long-term borrowing and lending, and lists some of the main instruments like stocks, bonds, and debentures.
Finance is essential for businesses and can come from internal or external sources. Internal sources include personal savings and retained profits. External sources are from outside the business and include ownership capital from shareholders and non-ownership capital from lenders like banks. Different sources have different benefits and costs. Long-term sources include equity shares, preference shares, and debentures, while short-term sources include trade credit and overdraft facilities. Debentures are debt instruments that allow companies to borrow money from the public over a long period at a fixed interest rate. They do not confer ownership or voting rights but are often secured against company assets.
The document provides an overview of the Indian financial system. It discusses that the financial system includes financial intermediaries like banks, mutual funds, and insurance companies; financial markets like money markets, capital markets, and derivatives markets; and financial assets/instruments like equity, debt, and indirect securities. The financial system mobilizes savings from households and channels them to corporations and governments through these various institutions and markets, in order to facilitate capital formation and meet short and long-term financing needs.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
The document discusses different types of bonds such as government bonds, municipal bonds, mortgage-backed securities, asset-backed securities, corporate bonds, and zero-coupon bonds. It provides details on the key features of bonds including their nominal value, issue price, maturity date, coupon rate and payment dates. It also outlines some of the main risks associated with investing in bonds such as interest rate risk, reinvestment risk, inflation risk, market risk, default risk, and call risk.
The document provides an overview of key concepts in business finance including:
1) The roles of financial management in organizations and the individuals involved like the financial manager.
2) The differences between financial institutions, instruments, and markets and how funds flow within organizations.
3) How financial management aims to maximize shareholder wealth through decisions that influence share price.
This document provides an overview of different types of financial instruments in India, including money market instruments, capital market instruments, and hybrid instruments. It describes various money market instruments like treasury bills, commercial papers, repos, and reverse repos. It also discusses capital market instruments like equity shares, preference shares, debentures, and bonds. Hybrid instruments are also mentioned, which have characteristics of both equity and debt.
Cover Story - China's Investment Leader - Dr. Alyce SUmsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
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China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
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Tired of chasing down expiring contracts and drowning in paperwork? Mastering contract management can significantly enhance your business efficiency and productivity. This guide unveils expert secrets to streamline your contract management process. Learn how to save time, minimize risk, and achieve effortless contract management.
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2. Stocks
Stocks are shares of ownership in a corporation. When you
become a stockholder or shareholder of a company, you
become part-owner of that company. Securities, on the
other hand, are proof of one’s ownership or indebtedness in
a company. Examples of securities are treasury bills and
commercial papers, which are considered as short-term and
are traded in the money market; and stocks and bonds,
which are long-term and traded in the capital market.
Securities are easily bought and sold in the stock market.
3. WHAT ARE THE TYPES
OF SECURITIES THAT I
CAN BUY IN THE STOCK
MARKET?
4. Common stocks
These are usually purchased for participation in the profits and control of
ownership and management of the company. Holders of common stocks
have voting rights. They are also entitled to an equal pro rata division of
profits without preference or advantage over another stockholder. However,
they have the last claim on dividends and are the last to collect in case of
corporate liquidation.
5. Preferred stock
Its name is derived from preference given to the holders of these stocks
over holders of common stocks. Holders of preferred stocks are entitled to
receive dividends, to the extent agreed upon, before any dividends are paid
to the holders of common stocks. However, preferred stocks usually have a
specified limited rate of return or dividend and a specified limited
redemption and liquidation price.
6. Warrant
A corporation can also raise additional capital by issuing warrants. A
warrant, normally issued on a detachable basis, allows its holders the right,
but not the obligation, to subscribe to new shares at a set price during a
specified period of time. It is usually provided free of charge and traded
separately in the securities market.
7. Philippine deposit receipts
A PDR is a security which grants the holder the right to the delivery or sale of the
underlying share, and to certain other rights including additional PDR or
adjustments to the terms or upon the occurrence of certain events in respect of
rights issues, capital reorganizations, offers and analogous events or the distribution
of cash in the event of a cash dividend on the shares. PDRs are evidences or
statements nor certificates of ownership of a foreign/foreign-based corporation. For
as long as the PDRs arenot exercised, the shares underlying the PDRs are and will
continue to be registered in the name of and owned by and all rights pertaining to
the shares shall be exercised by the issuer.
9. What is a 'Bond’
A bond is a debt investment in which an investor
loans money to an entity (typically corporate or
governmental) which borrows the funds for a defined
period of time at a variable or fixed interest rate. Bonds
are used by companies, municipalities, states and
sovereign governments to raise money and finance a
variety of projects and activities. Owners of bonds are
debtholders, or creditors, of the issuer.
10. Example
Because fixed-rate coupon bonds will pay the same percentage of its face value over
time, the market price of the bond will fluctuate as that coupon becomes desirable or
undesirable given prevailing interest rates at a given moment in time. For example if a
bond is issued when prevailing interest rates are 5% at $1,000 par value with a 5%
annual coupon, it will generate $50 of cash flows per year to the bondholder. The
bondholder would be indifferent to purchasing the bond or saving the same money at the
prevailing interest rate.
If interest rates drop to 4%, the bond will continue paying out at 5%, making it a more
attractive option. Investors will purchase these bonds, bidding the price up to a premium
until the effective rate on the bond equals 4%. On the other hand, if interest rates rise to
6%, the 5% coupon is no longer attractive and the bond price will decrease, selling at a
discount until it's effective rate is 6%.
Because of this mechanism, bond prices move inversely with interest rates.
11. Consumer Loan
An amount of money lent to an individual (usually
on a nonsecured basis) for personal, family, or household
purposes. Consumer loans are monitored by government
regulatory agencies for their compliance with consumer
protection regulations such as the Truth in Lending Act.
Also called consumer credit or consumer lending.
12. Amortization is an accounting term that refers to
the process of allocating the cost of an intangible asset
over a period of time. It also refers to the repayment of
loan principal over time
13. What is a 'Mortgage'
A mortgage is a debt instrument, secured by the collateral
of specified real estate property, that the borrower is
obliged to pay back with a predetermined set of payments.
Mortgages are used by individuals and businesses to make
large real estate purchases without paying the entire value
of the purchase up front. Over a period of many years, the
borrower repays the loan, plus interest, until he/she
eventually owns the property free and clear. Mortgages
are also known as "liens against property" or "claims on
property." If the borrower stops paying the mortgage, the
bank can foreclose.