HYBRID FINANCING Flashcards
is a type of ownership in a company that gives shareholders certain advantages over common stockholders.
PREFERRED STOCKS
Preferred stocks whose dividends are tied to the rate on Treasury securities.
Adjustable Rate Preferred Stocks (ARPs)
An arrangement whereby a firm sells land, buildings, or equipment and simultaneously leases the property back for a specified period under specific terms.
SALE AND LEASEBACK
TYPES OF LEASES:
Preferred A low-risk, largely tax-exempt, seven-week-maturity security that can be sold between auction dates at close to par
Market Auction (Money Market)
is a financial arrangement where a firm can gain access to the use of fixed assets without outright ownership. Instead of purchasing buildings or equipment, companies can lease them, which is particularly useful for maintaining flexibility and preserving capital.
LEASING
A lease under which the lessor maintains and finances the property
OPERATING LEASES
TYPES OF LEASES:
A lease that does not provide for maintenance services, is not cancelable, and is fully amortized over its life
FINANCIAL OR CAPITAL LEASES
TYPES OF LEASES:
The effective price paid for common stock obtained by converting a
convertible security
Conversion Price, Pc
are bonds or preferred stocks that, under specified terms and conditions, can be exchanged for (that is, converted into) common stock at the option of the holder
CONVERTIBLES
An exercise price that is specified to rise if a warrant is exercised after a designated date.
Stepped-Up Exercise Price
A warrant that can be detached from a bond and traded independently of it.
Detachable Warrant
is a certificate issued by a company that gives the holder the right to buy a stated number of shares of the company’s stock at a specified price for some specified length of time
A long-term option to buy a stated number of shares of common stock at a specified price.
Warrants
The value of common stock obtained by converting a convertible
security.
Conversion Value, Ct
which is similar to primary EPS except that all warrants and
convertibles are assumed to be exercised or converted, regardless of the likelihood of exercise or conversion.
Diluted EPS
where earnings available are divided by the average number of shares that would have been outstanding if warrants and
convertibles “likely to be converted in the near future” had actually been exercised or converted.
Primary EPS
