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Finance > Chapter 10 > Flashcards

Chapter 10 Flashcards

1
Q

Withholding tax

A

Tax deducted from a payment and remitted to the IRD on behalf of a recipient who receives the after-tax payment

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2
Q

Tax credit

A

A deduction from taxes payable

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3
Q

Floating debenture

A

Medium-term or long-term debt funds secured by a charge over all otherwise unsecured assets

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4
Q

Financial lease

A

A lease contract whereby the lessee acquires the use of an asset over a period approximately equal to the useful life of the asset

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5
Q

Lease interest

A

A contractual relationship between a tenant (lessee) and a property owner (lessor), where the tenant has the right to use the land for the period specified in the lease agreement in return for rental payments and other obligations

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6
Q

Operating lease

A

A short-term, cancellable lease where the lessee gains the use of an asset without ever buying the asset

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7
Q

Crowdfunding

A

Crowdfunding is a means of raising relatively small amounts of funds from the public to finance a business venture or project

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8
Q

Venture capital

A

Funds (usually equity) provided to relatively new businesses by public companies or government-sponsored enterprises

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9
Q

Retained earnings

A

Profits retained and reinvested in assets of the firm. Represents an internal source of equity finance

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10
Q

Private placement

A

A placement of shares or debt offered only to selected investors

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11
Q

Unpledged assets

A

Assets that have not been used as security for a loan

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12
Q

Line of credit

A

An informal arrangement with a bank to allow a firm to borrow up to a maximum specified amount over a set period of time

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13
Q

Revolving credit facility

A

A legal commitment by a bank to provide credit to a borrower up to a maximum specified amount when requested. Similar to a line of credit

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14
Q

Pledge

A

To put up assets as security for a loan

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15
Q

Collateral

A

Assets, such as inventory, that are pledged as security for a loan

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16
Q

Factoring

A

The discounted sale of accounts receivable to a factoring company or financial institution in return for immediate receipt of funds. Credit and collection activities are undertaken by the factor

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17
Q

Non-resource basis

A

With respect to the sale of accounts receivable, when the factor takes on the risk of bad debts

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18
Q

Invoice discounting

A

The discounted sale of accounts receivable to a factoring company or financial institution in return for immediate receipt of funds. Unlike factoring, credit and collection activities are retained by the seller of the accounts

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19
Q

Commercial bills

A

Unsecured short-term marketable securities issued either by companies or by banks

20
Q

Unsecured

A

When no collateral is offered as security against a loan

21
Q

Syndicate

A

A group of lending institutions which pool funds on a one-off basis to lend to a very large borrower. Limits risk exposure for any one given lender

22
Q

Public offering

A

Issue of securities by a company to the public

23
Q

Underwriting

A

The agreement by an investment bank to purchase any securities that are not subscribed by the public in a new issue

24
Q

Subscribe

A

To agree to purchase a security, often shares

25
Q

Convertible securities

A

Securities that begin their life in one form (usually debt) and that may be converted to another form (usually equity) at a later date. Includes convertible notes, capital notes and convertible preference shares

26
Q

Offshore finance

A

Capital raised overseas

27
Q

Euromarket

A

An international financial market that facilitates the trading of debt and equity securities outside the country of origin

28
Q

Eurocurrency loans

A

Loans issued by an international bank, denominated in a major currency other than the legal currency of the country in which it is issued

29
Q

Foreign bonds

A

Bonds issued in a foreign country, denominated in the currency of that foreign country

30
Q

Eurobonds

A

Bonds issued outside the country of the currency in which they are denominated

31
Q

Euroequities

A

Equity funds issued in offshore centres to achieve a wider distribution of ownership and greater capital than would otherwise be possible

32
Q

Subsidiary

A

A company owned and controlled by another company

33
Q

Parent company

A

A company that owns and controls another company

34
Q

Consolidated

A

The combined financial accounts of a group of companies, composed of a parent and its subsidiaries

35
Q

Dividend policy

A

A strategic policy that considers the need for profits to be retained within the firm for reinvestment and the preferences of shareholders for the amount and consistency of dividends

36
Q

Debt ratio

A

A measure of the proportion of debt relative to total financing; or, alternatively, the proportion of assets financed by debt

37
Q

Debt-equity ratio

A

A measure of the proportion of long-term debt relative to shareholders’ equity

38
Q

Cost of capital

A

The cost of raising and using funds

39
Q

Optimal capital structure

A

The best mix of debt and equity that minimises the cost of capital and maximises the value of the firm

40
Q

Capital structure

A

The proportionate mix of debt and equity used to finance a firm

41
Q

Cost of debt

A

The cost of financing with debt. Composed of interest and issue costs, less any interest tax shield

42
Q

Issue costs

A

Administration, selling and underwriting costs associated with the issue of a new security

43
Q

Interest tax shield

A

The savings a business makes due to the tax-deductibility of interest payments

44
Q

Cost of equity

A

The cost of financing with equity. Composed of dividends and issue costs

45
Q

Weighted average cost of capital (WACC)

A

The overall cost to a firm of all long term sources of finance

Finance (13 decks)

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