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Financial Management

The document discusses various types of financial instruments including equity shares, preference shares, debentures, bonds. Equity shares represent ownership in a company and give investors voting rights and claim to profits/assets. Preference shares have priority over common stock for dividends and assets in bankruptcy. Debentures are unsecured bonds backed by the credit of the issuer. Bonds are a type of loan to an entity that must be repaid by a set maturity date along with fixed or variable interest payments.

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Haritha Jayan
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53 views

Financial Management

The document discusses various types of financial instruments including equity shares, preference shares, debentures, bonds. Equity shares represent ownership in a company and give investors voting rights and claim to profits/assets. Preference shares have priority over common stock for dividends and assets in bankruptcy. Debentures are unsecured bonds backed by the credit of the issuer. Bonds are a type of loan to an entity that must be repaid by a set maturity date along with fixed or variable interest payments.

Uploaded by

Haritha Jayan
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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PRESENTATION BY HARITHA J

 EQUITY SHARES
 PREFERENCE SHARES
 DEBENTURES
 BONDS
 Equity share is a main source of finance for any
company giving investors rights to vote, share
profits and claim on assets.
 Various types of equity capital are authorized,
issued, subscribed, paid up, rights, bonus,
sweat equity etc. The value of equity shares are
expressed in terms of face value or par value,
issue price, book value, market value etc
 They are categorized under long-term sources
of finance because legally they are
irredeemable in nature.
 For an investor, these shares are a certificate of
ownership in the company by virtue of which
investors are entitled to share the net profits
and have a residual claim over the assets of the
company in the event of liquidation.
 Investors have voting rights in the company
and their liability to the company is limited to
the amount of investment.
 Preference shares, more commonly referred to
as preferred stock, are shares of a company’s stock
with dividends that are paid out to shareholders
before common stock dividends are issued.
 If the company enters bankruptcy, the
shareholders with preferred stock are entitled to be
paid from company assets first. Most preference
shares have a fixed dividend, while common
stocks generally do not.
 Preferred stock shareholders also typically do not
hold any voting rights, but common
shareholders usually do have.
 A debenture is a type of debt instrument that is not
secured by physical assets or collateral.
 Debentures are backed only by the general credit
worthiness and reputation of the issuer.
 Both corporations and governments frequently
issue this type of bond to secure capital. Like other
types of bonds, debentures are documented in
an indenture.
 Debentures are the most common form of long-
term loans that can be taken out by a corporation.
 These loans are repayable on a fixed date and pay
a fixed rate of interest.
 A company normally makes these interest
payments prior to paying out dividends to
its shareholders, similar to most debt instruments.
 In relation to other types of loans and debt
instruments, debentures are advantageous in that
they carry a lower interest rate and have a
repayment date that is far in the future.
 An example of a government debenture would be
any government-issued Treasury bond (T-
bond) or Treasury bill (T-bill). T-bonds and T-bills
are generally considered risk free because
governments, at worst, can print off more money
or raise taxes to pay these types of debts.
 A bond is a fixed income 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 debt holders, or creditors, of
the issuer.
 When companies or other entities need to raise
money to finance new projects, maintain
ongoing operations, or refinance existing debts,
they may issue bonds directly to investors
instead of obtaining loans from a bank.
 The indebted entity (issuer) issues a bond that
contractually states the interest rate that will be
paid and the time at which the loaned funds
(bond principal) must be returned (maturity
date). The interest rate, called the coupon
rate or payment, is the return that bondholders
earn for loaning their funds to the issuer.
 ZERO COUPON BONDS
 GOVERNMENT BONDS
 INCOME BONDS
 FLOATING-RATE BONDS
 CONVERTIBLE BONDS ETC

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