BA101 (Week 4) Chapter 16 Flashcards
Capital
Equipment, land, things company owns; Long-term funds
Debt financing
Act of borrow funds
Creditworthiness
Capacity (make enough enough to pay off cash)
collateral (2nd source of repayment)
Character (successfully managed debt obligation)
Collateral
Security, deposit, if you can’t pay back. (Pencil and take ID)
Bonds
Long term debt securities purchased by investors.
Protective covenants
Restrictions imposed on specific financial policies of the firm.
Commercial paper
Short-term debt security normally issued by firms in good financial conditions.
Commercial banks
Obtains deposits from individuals and use funds primarily provide business loans
Equity financing
Receiving investment from owners (issuing or retaining earnings) cash invested.
Common stocks
Security that represents partial ownership of retaining earnings and votes.
Preferred Stocks
Security that represents partial ownership of a particular firm and offer specific priorities over common stocks. Does not vote.
Prime rates
Rate of interest typically charged on loans to most creditworthy firms that borrow.
Par Value
Amount that bond holders receive at maturity.
Indenture
Legal document that explains obligations to bond holders.
Call Features
Indenture
Provides issuing firm with the right to repurchase the bonds before maturity.
Common creditors that provide debt financing
- Commercial Bank
- Saving Institution
- Finance Companies
- Insurance Companies
- Mutual Funds
- Pension Funds
Venture capital firm
Firm composed of indictable who invest in small businesses.
Initial Public Offering (IPO)
First issue of stock to the public.
Stock Mutual Funds
Investment companies that invest funds received from individual investors in stocks.
Statement Of Cash Flows
Reports sources and uses of cash organized by activity: operating, investing and financing.
Capital Structure
Sources of funds, the amount of debt vs. Equity finance. How the firm finance it’s operations and growth by using different sources of funds.
Fixed Rate
The interest rate stays the same.
Floating rate
Interest rates are either high or low, depend of stability.
