Chapter 10 Sources Of Finance Flashcards
What are the two types of shares a company can issue to raise equity finance?
Preference shares and ordinary shares
What is the right called that allows existing shareholders to maintain their ownership percentage?
Pre-emption rights
What can happen when a company issues shares to new investors?
Dilution of control for existing owners
What type of financing typically commands the highest returns as compensation due to its risk?
Equity financing
How often are dividends typically paid to shareholders?
Once or twice per year
What are capital gains in the context of equity shareholders?
Increases in the value of their shares as the value of the company rises
What rights do equity shareholders exercise in a company?
Voting rights
What financial metric is affected by equity financing?
Earnings Per Share (EPS)
What risk does debt financing increase for a company?
Gearing risk
What is a critical factor for a company to ensure it can manage its debt obligations?
Forecasting future cash flows
What flexibility does equity financing provide to a company during low profit years?
The option not to pay dividends
What do debt holders typically demand from a company?
Security
What is the main difference between short-term and long-term financing?
Short-term financing is used for short-term assets; long-term financing is used for long-term assets
What are the issue costs associated with equity financing?
Underwriting, broker fees, etc.
What should a company consider before selecting its source of finance?
Different factors impacting the decision
What are the two main sources of finance for a company?
Equity and debt
Comparison of ordinary shares and Dreference shares
Feature
Dividend
rate
Dividend
distribution
Liquidation
Voting
rights
Variable-as per profit
Paid only if there are spare funds after
the payment ofa preference dividend
The last to be repaid in a liquidation
Normally receive the right to vote on
major decisions.
Ordinary shares
Redemption Their investments are not normally
redeemable.
Methods of Floatation Issuing Shares
Initial public offer
Private placing
Alternate Investment Market (AIM)
Introduction
Right Issue
Bonus Issue
There are six principal methods for a company to raise equity finance:
Initial nublic offer ((PO)
Public offer means share issue to public.
It may be underwritten or not. ndeohng
Offer can made through an issuing house.
Issuing house may be merchant bank.
IPO’s are expensive mode of share issue.
Private nlacing
First offer by the company of its shares is called an initial public offer.
Fixed e.g. 7% per annum
Offer price is decided by the company and urtderwriter.
There is less risk and cost in private placing.
Receives the dividend before ordinary
shareholders (therefore lower risk)
Repaid before (in preference to) the
ordinary shareholders
Alternate Investment Market (AIM)
Preference shares
Typically receive no right to vote on
decisions.
company
Their investments are normally
redeemable.
AIM is an alternative to the main stock exchange
CFE College of Accountancy and Finance
There will be maximum limit on number of shares issued in IPO
Bank ne bol
• When shares are sold through a broker to one or more financial institutions (not to general puble)
is known as private placing.
Private placing is for lower value of share issud s sse
Private placing will result in few numbers of shareho lders.
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What is the primary difference between placing and introduction in financial contexts?
In placing, no new shares are made available to the market, while introduction allows for the trading of existing shares.
Introduction requires at least 25% of shares to be held by the general public.
What are the advantages of placing shares?
Placing’s are quicker to perform and require less disclosure.
Placing is cheaper and well-suited to small issues.
What are the disadvantages of placing shares?
Control will be restricted in few hands and offers are typically at a discount of the current market value.
Offers are in accordance with existing shareholding.
What is a bonus issue in finance?
Converting reserves into share capital.
It increases the number of shares but does not increase the company’s assets.
What is a right issue?
A right issue allows shareholders to buy new shares at a specified ratio, typically to raise capital without paying cash dividends.
For example, a shareholder can buy one new share for each three they own.
How does a right issue differ from a bonus issue?
In a right issue, shares are issued in exchange for cash consideration, while in a bonus issue, shares are issued by capitalizing existing reserves.
Right issues increase both share capital and cash, while bonus issues only increase share capital.
What is debt finance?
Finance obtained when a company borrows money in exchange for interest payments.
Debt can be classified as short-term or long-term.
What is the general purpose of short-term finance?
To fund short-term working capital requirements.
It is usually less expensive and more flexible than long-term finance.
What is the typical use of long-term finance?
For major long-term investments.
Long-term finance is usually more expensive and less flexible.
Fill in the blank: Converting reserves into share capital is known as a _______.
bonus issue
True or False: A bonus issue increases the assets of a company.
False
A bonus issue increases the share capital without increasing the assets.
List the types of debt finance.
- Short-term debt
- Long-term debt
What is a short-term bank loan?
A loan intended for funding smaller investments.
What is a certificate of deposit?
A financial product offered by banks that provides a fixed interest rate for a specified term.
Define a treasury bill.
A short-term government security with a maturity of less than one year.
What is trade credit?
An agreement between businesses allowing the buyer to purchase goods and pay for them later.
Short-term loans are suitable for funding _______.
smaller investments.
Long-term loans are suitable for funding _______.
major long-term investments.
Debt is classified into which two categories?
Redeemable and irredeemable.
What are redeemable debts?
Debts that can be repaid in proportions or as a lump sum at the end of the loan term.
What is the difference between secured and unsecured loans?
Secured loans are backed by collateral, while unsecured loans are not.
What happens if covenants are breached?
The loan becomes repayable.
What are the features of long-term loans?
They may include bonds, loan stock, debentures, and loan notes.
What is a loan note?
A contract for a loan that specifies repayment terms and interest rate.
What are the characteristics of Eurobonds?
Short term with maturity of less than 12 months for government notes or less than 5 years for corporate loan notes.
What is the main difference between a bank loan and loan stock?
Bank loans are quick to arrange and require security, while loan stock involves public issuance and has higher costs.
True or False: Interest on redeemable debt is an allowable deduction for the borrower.
True.
What are the risks associated with leases?
Ownership risks and insurance responsibilities.
In terms of flexibility, how do bank loans compare to loan stock?
Bank loans have more flexible terms.
What is an operating lease?
A lease agreement that allows the lessee to use an asset without ownership.
Fill in the blank: Loan stock is __________ to arrange due to public requirements.
slower.
What type of information is required for bank loans?
Detailed financial information.
What is an Alurobond?
A bond denominated in a currency that is not native to the country where it is issued.
What are Furobonds known for?
They give the issuer flexibility to choose the country in which to offer their bond according to the country’s regulatory constraints.
Furobonds are named after what?
The currency they are denominated in.
What is a finance lease?
A lease that transfers substantially all the risks and rewards incidental to ownership of an asset.
True or False: A finance lease allows the lessee to buy the asset at the end of the lease.
True.
What is an operating lease?
A lease other than a finance lease.
In a finance lease, who is responsible for maintenance of the asset?
The lessee.
Fill in the blank: The contract in an operating lease _______ allows the lessee to buy the asset at the end of the lease.
never.
What affects the tax deductibility of rental payments?
The tax regime.
What is the typical duration of a finance lease compared to the life of the asset?
Long (compared to the life of the asset).
Who retains the legal ownership of the asset in a finance lease?
The lessor.
What is a Purodollar bond?
A bond that could be issued anywhere outside the USA.
What is the difference between a finance lease and an operating lease regarding risks and rewards?
In a finance lease, risks and rewards pass to the lessee; in an operating lease, they remain with the lessor.
How are operating leases typically treated in financial analysis?
They are capitalized and affect key ratios (ROCE, gearing).
What are the responsibilities of the lessor in an operating lease?
Maintenance of the asset and ownership.
Fill in the blank: A European bond could be issued anywhere outside _______.
Japan.
What is a Furo sterling bond?
A bond that could be issued anywhere outside the UK.
True or False: The lessee has the right to use the asset in return for a series of rental payments in both finance and operating leases.
True.
What is the typical duration of an operating lease compared to the life of the asset?
Short (compared to the life of the asset).
What is a warrant?
A warrant is similar to a convertible bond, allowing the holder to set a price rather than convert the underlying bond into stock.
How can the ‘stock’ part of a warrant be treated?
The ‘stock’ part of a warrant can be separated from the bond and traded on its own.
What is a hybrid in finance?
A hybrid is a financial instrument that combines features of equity and debt.
What is a convertible bond?
A convertible bond is a debt instrument that can be converted into equity at a predetermined ratio.
What happens to a convertible bond if it is not converted?
If not converted, the debt will be redeemed at the redemption date.
What is an overdraft?
An overdraft is a limit available on a current account that can be repayable on demand.
What are the penalties associated with overdraft limits?
Penalties for breaching overdraft limits can be high.
What are certificates of deposit (CDs)?
CDs are securities issued by a bank, acknowledging that a certain amount of money has been deposited for a specific period.
What is a key feature of CDs in terms of negotiability?
CDs are negotiable and traded on the CD market.
What are Treasury bills (T-bills)?
T-bills are short-term government securities issued for cash deficiencies in government programs, lasting less than a year.
What happens at the end of the duration of a T-bill?
At the end of the duration, the full amount will be received by the holder.
What is trade credit?
Trade credit is credit available from suppliers and is one of the easiest and cheapest sources of short-term finance.
What is an advantage of trade credit?
No interest is incurred if the company does not default.
What is a disadvantage of trade credit?
Delay in payment will worsen a company’s credit rating.
Fill in the blank: Overdrafts can be repayable on _______.
demand
True or False: Certificates of deposit are issued to individual retail customers only.
False
What is the typical duration for which CDs are issued?
Usually, a short term.
List two uses of trade credit.
- Reduces the need for finance from other sources
- Allows purchase of current assets like raw materials on credit
What is the primary purpose of commercial paper?
Financing of payroll, accounts payable, inventories, and meeting short-term liabilities
Commercial paper is an unsecured short-term debt issued by a corporation.
What types of loans should be matched with asset life?
Fixed asset with long-term loan and current asset with short-term loan
Matching loan life with asset life is crucial for effective financial management.
What are the two types of interest rates associated with debt?
Fixed interest and floating interest
Fixed interest means the rate remains unchanged, while floating interest may change over time.
What rights do debt holders typically lack?
Voting rights
Debt holders do not have any voting rights in the company.
What is a major disadvantage of unsecured debt for investors?
High investment risk
Unsecured debt investments carry a higher risk compared to secured debt.
In the case of liquidation, what is the rank of debt holders compared to other payables?
Higher than any other payables
Debt holders are prioritized in repayment during liquidation.
What is one advantage of debt for companies?
Interest on debt is an allowable deduction for tax calculations
This can reduce the overall tax burden for companies.
What happens to a company’s future borrowing capacity when it has high debt?
Future borrowing capacity will be decreased
High levels of debt can limit a company’s ability to secure additional financing.
What must a company do in case of low profit regarding fixed interest payments?
Pay fixed interest regardless of profits
Companies are obligated to pay fixed interest even in low-profit scenarios.
True or False: Debt holders can appoint a liquidator in case of non-payment of interest.
True
This right allows debt holders to take action if interest payments are missed.
Fill in the blank: A company should match loan life with _______.
[asset life]
What are the two factors influencing the choice of debt finance?
Availability and duration
These factors determine the feasibility and terms of debt financing.
What is the consequence of high profit for debt holders?
They receive fixed profit
Debt holders benefit from fixed returns even when the company performs well.
What is a disadvantage of high debt for a company regarding dividends?
Dilution of EPS and no immediate dividends
High debt can affect earnings per share and the ability to pay dividends.
What are issue costs?
Low costs associated with issuing securities
What is the significance of selecting the source of finance for a company?
Critical for long-term survival
What does ‘gearing’ refer to in finance?
Balance of long-term financing between equity and interest-bearing debt
How is the gearing level evaluated?
By considering the proportion of interest-bearing debt to equity
What happens if a company is highly geared?
It may prefer equity finance over debt finance
According to the Companies’ Act, what restriction do private companies face?
Cannot offer shares for sale to the public
What are the basic characteristics of securities?
- All securities have par value
- Interest is paid annually
- Can be traded in the market
List types of debt instruments.
- Bonds
- Loan notes
- Debentures
- Loan stock
- Commercial papers
What is the maturity period of commercial paper?
Very short term, typically 9 months
What is a loan note?
Unsecured long-term loan with specific terms
What is a debenture?
Secured long-term loan with a maturity of 5 to 20 years
What does the market value of debt consist of?
- Present value of interest payments
- Present value of redemption value
How is the market value of a bond affected?
Fluctuates with market and company conditions
What is the formula for valuing loan stock based on expected returns?
(Interest earnings x annuity factor)
Fill in the blank: The nominal value of debt is often issued at _______.
Rs100
What does the coupon rate represent?
The fixed percentage of nominal value set at the time of issue
What factors does the market consider when valuing debt?
- Reputation
- Interest rate expectations
True or False: Debt is generally issued at a premium.
False
What happens to the coupon rate during market fluctuations?
It remains fixed while the market value changes
What is the required rate of return?
The minimum return expected by investors from a security
What is the cash flow characteristic of zero coupon bonds?
Large discount on the par value and no payment until redemption date
Zero coupon bonds do not pay interest during their life and are sold at a discount to their face value.
What is a hybrid instrument in finance?
A financial instrument that has features of both Debt and Equity
Examples include convertible bonds and warrants.
What are the advantages of zero coupon bonds?
- No payment till redemption date
- Debt holder enjoys interest as well as capital gain
- Exact cost is known at the date of loan receipts
Zero coupon bonds are beneficial for investors looking for a lump sum return at maturity.
What are the disadvantages of zero coupon bonds?
The advantage for lenders is restricted unless the rate of discount on the bonds offers a high yield
Investors must be willing to sacrifice periodic returns for a higher return at maturity.
True or False: A fixed charge on loan stock allows the specified assets to be sold while the loan is outstanding.
False
A fixed charge prevents the sale of specified assets while the loan is outstanding.
What is a floating charge?
A charge on a class of assets allowing the sale of some assets within that class
It converts into a fixed charge upon default in payment.
What is the interest rate characteristic of loans?
The interest rate can be fixed or floating
Fixed rates are agreed upon at the outset, while floating rates vary with market conditions.
Fill in the blank: A _______ gives the holder the right to convert the bond into ordinary shares at maturity at a pre-decided conversion rate.
Convertible Bond
Fill in the blank: A _______ gives the holder the right to buy ordinary shares at a set price.
Warrant
What is the present value of cash flows discounted at 10% for 3 years?
445
This value is calculated based on the discount factor for each year.
What is the discount factor for 4 years at 10%?
0.683
This factor is used to calculate the present value of future cash flows.
What is a key feature of convertible bonds?
They allow the bondholder to convert the bond into shares
This feature adds equity-like characteristics to the bond.
What is the effect of conversion on EPS?
EPS will be reduced upon conversion
This is because the number of shares increases when convertible bonds are converted to equity.
What is a conversion premium?
The difference between the market price of the convertible bond and its conversion value
Conversion premium = M.V. of debt - conversion value.
What is conversion value?
The current market value of shares into which one unit of debt can be converted
Conversion value = number of shares x M.V. per share in one unit.
List the factors on which the market value of convertible notes depends.
- Market expectations about returns on equity
- The time length till option exercise date
- The current conversion value
- Price of straight debts
What are the advantages of convertible bonds for a company?
- Delayed equity
- Investors have time to observe company risk profile
- High gearing before conversion
- Potential for higher returns from equity
What are the disadvantages of convertible bonds for a company?
Conversion may lead to a reduction in EPS
This could impact the perceived profitability of the company.
What are the advantages of convertible bonds for investors?
- Enjoyment of future voting rights
- Potential for fixed income from debt
- Opportunity for higher returns if share value increases
What are the disadvantages of convertible bonds for investors?
Reduction in EPS upon conversion
This could affect the overall value of the investment.
What is a conversion rate?
The price of one ordinary share at which the bond can be converted
It is expressed in terms of the number of shares.
True or False: The conversion value is expected to increase as the conversion date approaches.
True
This is based on the assumption that the company’s shares will increase in market value over time.
What happens at the maturity date of a convertible bond?
The holder can either get repayment in cash or convert it into ordinary shares
This choice depends on the share price at the maturity date.
What is the purpose of interest payments on convertible bonds?
Interest is paid periodically until maturity
This provides a fixed income to the bondholder until conversion or repayment.
What is the significance of interest in tax calculations?
Interest is allowable against tax calculations.
How do fixed interest payments benefit financial planning?
Fixed interest payments make financial planning easier.
What happens to convertible debts if converted into equity?
Convertible debts do not need cash redeem if converted into equity.
What are the core sources of finance for companies?
Companies use a variety of sources of finance to achieve efficiency.
What is an important aspect of financial management regarding capital structure?
The choice of methods of financing should provide adequate working capital.
What balance should be achieved in long-term capital structure?
A suitable balance between equity and debt capital.
What is a consequence of converting debt to equity?
If converted, control will be diluted.
What does Islamic finance comply with?
Islamic finance includes financing activities that comply with Sharia (Islamic Law).
What is the effect of convertible debt on debt equity ratio?
Convertible debt will increase debt equity ratio, thus increasing financial risk.
What practices are prohibited under Shariah in financing?
Certain practices and principles under conventional financing products.
Name an important principle of Islamic finance.
Murabaha.
What is required for each transaction in Islamic finance?
Each transaction must be related to a real underlying economic transaction.
What is Riba in the context of Islamic finance?
The lender cannot charge Riba (interest) from the borrower.
How do parties in Islamic finance contracts share outcomes?
Parties share profit/loss and risks associated with the transaction.
What is a key feature of Murabaha?
Murabaha is a cost plus transaction.
What must the subject matter of a Murabaha sale be?
The subject matter of sale must be existing at the time of sale.
Is the sale of an unborn calf valid in Islamic finance?
The sale is void.
What ownership condition must the seller meet in a Murabaha sale?
The subject matter must be in the ownership of the seller at the time of sale.
What happens if a seller sells a car they do not own yet?
The sale is void.
What must the subject matter of sale be at the time of sale?
In the physical or constructive possession of the seller
If the seller has not delivered the item, the sale is void.
What are the conditions for a sale to be considered valid?
The sale must be prompt and absolute
A sale must not be contingent on future events.
What type of property can be sold?
A property of value
The property must have intrinsic value for the sale to be valid.
What does the delivery of the sold commodity to the buyer need to be?
Certain and not depend on contingency or chance
If a buyer purchases stolen goods hoping to recover them, the sale is void.
What is necessary for the validity of a sale regarding the price?
Absolute certainty of price
If the price remains uncertain, the sale is void.
What characterizes a conditional sale?
A sale that is dependent on certain conditions
An example is if a buyer’s purchase is contingent on employment of a relative.
What must be true about the terms of payment in a valid sale?
The parties must fix the price and due date of payment unambiguously
Payment terms cannot reference an uncertain future event.
What is Ijara?
A lease agreement where a bank buys an asset and rents it out to the client
The bank retains ownership while the client enjoys possession.
What responsibilities does the lessor have in an Ijara agreement?
Retains ownership and bears the loss of the asset
Includes obligations for repairs and insurance.
Who bears the operating expenses related to the asset in an Ijara?
The lessee
The lessee is responsible for damages due to negligence.
What is a key difference between conventional leases and Ijara agreements?
In a conventional lease, the lessor can rescind unilaterally; in Ijara, mutual consent is required for termination
This distinction highlights the nature of contractual obligations.
True or False: A lease and sale agreement should be separate and contingent.
False
Lease and sale agreements must be separate and non-contingent.
What is Musharika?
A form of Islamic business partnership where both bank and client enter into a temporary contract
In Musharika, both parties share profits and losses based on an agreed ratio.
Who runs the business in a Musharika agreement?
The client runs the business while the bank monitors and supervises it
What is the loss limitation in a Musharika agreement?
The loss is restricted to the amount of investment
How is profit shared in a Musharika agreement?
Shared on an agreed ratio
What are the two types of Mudaraba?
- Restrictive Mudaraba
- Unrestrictive Mudaraba
What defines a Restrictive Mudaraba?
The investor specifies investment details and restricts the working partner within those specifications
What defines an Unrestrictive Mudaraba?
The investor grants the working partner the right to undertake any lawful investment to make profits
What does the Mudarib provide in a Mudaraba agreement?
Human capital
What does the rab al maal provide in a Mudaraba agreement?
Financial capital
What happens in the case of loss in a Mudaraba?
The bank loses money while the Mudarib loses his efforts
What is the primary responsibility of the working partner in a Musharika?
To manage and run the business
True or False: In Musharika, both parties make an investment.
True
Fill in the blank: In a Mudaraba, profit is shared according to the _______.
[agreed terms]
What is venture capital?
Funding provided to a private entity by a specialized investment institution
Venture capital is typically aimed at startups, management buyouts, and business expansions.
What must management provide to secure venture capital?
A proper business plan
This plan outlines how the business will operate and grow.
What is the typical investment duration for venture capital?
3-7 years
This timeframe allows investors to achieve a return on their investment.
When is venture capital appropriate?
For startup businesses, management buyouts, and business expansion
These scenarios typically require substantial funding.
Who are business angels?
Wealthy individuals who purchase equity shares
They do not participate in business management.
What is the role of business angels in financing?
They provide equity finance for small companies in their business startup
Business angels are not very common.
What do private equity funds describe?
Equity in unquoted operating companies
This includes both venture capitals and private equity funds.
What is the goal of a private equity fund?
To take a reasonably large stake in mature businesses
They often seek to enhance value by eliminating inefficiencies or driving growth.
What happens in a typical leveraged buyout transaction?
The private equity firm buys majority control of an existing or mature company
This strategy is used to gain control and influence over the company.
What is asset securitization?
The process of converting existing assets or future cash into marketable securities
This process is widely used in the financial services industry.
What is a Special Purpose Vehicle (SPV) in asset securitization?
A company set up to hold the asset and issue securities to investors
This allows for the transfer of risk and capital between entities.
What is asset backed securitization?
The conversion of current assets into marketable securities
This allows companies to raise cash against their existing assets.
What is future flows securitization?
The conversion of future cash flows into marketable securities
This enables companies to secure funding based on expected income.
When is securitization appropriate?
To convert non-marketable assets
This helps companies gain liquidity from illiquid assets.
What is Foreign Direct Investment (FDI)?
Investment by a company in overseas operations
This often involves expanding existing operations into new markets.
What is venture capital?
Funding provided to a private entity by a specialized investment institution
Venture capital is typically aimed at startups, management buyouts, and business expansions.
What must management provide to secure venture capital?
A proper business plan
This plan outlines how the business will operate and grow.
What is the typical investment duration for venture capital?
3-7 years
This timeframe allows investors to achieve a return on their investment.
When is venture capital appropriate?
For startup businesses, management buyouts, and business expansion
These scenarios typically require substantial funding.
Who are business angels?
Wealthy individuals who purchase equity shares
They do not participate in business management.
What is the role of business angels in financing?
They provide equity finance for small companies in their business startup
Business angels are not very common.
What do private equity funds describe?
Equity in unquoted operating companies
This includes both venture capitals and private equity funds.
What is the goal of a private equity fund?
To take a reasonably large stake in mature businesses
They often seek to enhance value by eliminating inefficiencies or driving growth.
What happens in a typical leveraged buyout transaction?
The private equity firm buys majority control of an existing or mature company
This strategy is used to gain control and influence over the company.
What is asset securitization?
The process of converting existing assets or future cash into marketable securities
This process is widely used in the financial services industry.
What is a Special Purpose Vehicle (SPV) in asset securitization?
A company set up to hold the asset and issue securities to investors
This allows for the transfer of risk and capital between entities.
What is asset backed securitization?
The conversion of current assets into marketable securities
This allows companies to raise cash against their existing assets.
What is future flows securitization?
The conversion of future cash flows into marketable securities
This enables companies to secure funding based on expected income.
When is securitization appropriate?
To convert non-marketable assets
This helps companies gain liquidity from illiquid assets.
What is Foreign Direct Investment (FDI)?
Investment by a company in overseas operations
This often involves expanding existing operations into new markets.
What are ordinary shares?
Equity securities that represent ownership in a company.
What is the variable nature of ordinary shares?
Dividends are paid based on the company’s profit.
When are dividends on ordinary shares paid?
Only if there are spare funds after the payment of a preference dividend.
What is the priority of ordinary shares in liquidation?
They are the last to be repaid in a liquidation.
What voting rights do ordinary shareholders typically have?
They normally receive the right to vote on major decisions.
Are investments in ordinary shares redeemable?
No, their investments are not normally redeemable.
What are preference shares?
A type of share that typically provides fixed dividends and priority over ordinary shareholders in dividend payments and asset repayment.
Preference shares usually have a fixed dividend rate, such as 7% per annum.
What is the typical dividend rate for preference shares?
Fixed rate, e.g. 7% per annum.
This rate is predetermined and does not fluctuate.
Who receives dividends first, preference shareholders or ordinary shareholders?
Preference shareholders.
This gives preference shareholders a lower risk compared to ordinary shareholders.
In the event of liquidation, who is repaid first, preference shareholders or ordinary shareholders?
Preference shareholders.
They are paid before ordinary shareholders.
Do preference shareholders typically have voting rights on company decisions?
No.
Preference shareholders usually do not have rights to vote.
Are preference shares typically redeemable?
Yes.
Investments in preference shares are normally redeemable.
What are bank loans characterized by in terms of flexibility?
Terms are flexible
Who typically requires financial information for bank loans?
Only bank will require information
How quickly can bank loans be arranged?
Quick to arrange
What is a notable cost advantage of bank loans?
Low cost
What are typically required for bank loans?
Security (collateral) and covenants are required
What type of financial information is required for bank loans?
Detailed financial information is required
