Corporate Finance Overview

What are the main types of capital discussed in corporate finance?

Which characteristic is unique to equity shares compared to preference shares?

What is a defining feature of debentures in corporate finance?

Why are retained earnings significant for a business?

How do preference shares differ from equity shares in terms of dividends?

In what way are bank loans categorized in relation to corporate finance?

What primarily influences the amount of retained earnings a company can generate?

Which of the following describes commercial papers as a financing source?

Sources of Corporate Finance

Capital Types: Corporate capital comprises owned capital (company resources) and borrowed capital (loans). Understanding these types is essential for effective financial management.

Financial Instruments

Shares: Two types are explained:
- Equity shares: Represent ownership, carry voting rights, and dividends fluctuate based on profits.
- Preference shares: Fixed dividends, priority claim over equity shares in dividend distribution.
Debentures: Secured instruments issued for borrowing. They are promissory notes with fixed interest rates, and have priority over equity in liquidation.
Commercial Papers & Deposits: Companies utilize commercial papers and deposits for short-term financing. Bank loans and facilities are also significant sources.

Retained Earnings

Retained Earnings: Profits not paid as dividends, reinvested in the business. Determinants include earnings and tax policies.

Role of Financial Institutions

Financial Institutions: Organizations like investment banks, development banks, and commercial banks facilitate corporate financing through loans, underwriting, and capital investment support.

International Financing

ADRs & GDRs: American Depository Receipts (ADRs) and Global Depositary Receipts (GDRs) let companies tap into international capital markets.

This quiz explores the essential components of corporate finance, including capital types, financial instruments like shares and debentures, and the significance of retained earnings. Understand how these elements contribute to effective financial management in corporations.