Podcast
Questions and Answers
What are the main types of capital discussed in corporate finance?
What are the main types of capital discussed in corporate finance?
- Liquid capital and fixed capital
- Owned capital and borrowed capital (correct)
- Equity capital and preference capital
- Retained capital and commercial capital
Which characteristic is unique to equity shares compared to preference shares?
Which characteristic is unique to equity shares compared to preference shares?
- Offer guaranteed return on investment
- Have priority over preference shares in dividend distribution
- Provide fixed dividends
- Come with voting rights (correct)
What is a defining feature of debentures in corporate finance?
What is a defining feature of debentures in corporate finance?
- They represent ownership in the company
- They are unsecured financial instruments
- They have fixed interest rates (correct)
- Their dividends vary based on company profits
Why are retained earnings significant for a business?
Why are retained earnings significant for a business?
How do preference shares differ from equity shares in terms of dividends?
How do preference shares differ from equity shares in terms of dividends?
In what way are bank loans categorized in relation to corporate finance?
In what way are bank loans categorized in relation to corporate finance?
What primarily influences the amount of retained earnings a company can generate?
What primarily influences the amount of retained earnings a company can generate?
Which of the following describes commercial papers as a financing source?
Which of the following describes commercial papers as a financing source?
Flashcards
Owned Capital
Owned Capital
Funds generated from a company's own resources, like profits retained after dividends.
Borrowed Capital
Borrowed Capital
Funds borrowed from external sources, like loans or bonds.
Equity Shares
Equity Shares
Shares that represent ownership in a company and come with voting rights.
Preference Shares
Preference Shares
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Debentures
Debentures
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Retained Earnings
Retained Earnings
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Commercial Papers
Commercial Papers
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Deposits
Deposits
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Study Notes
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
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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.
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Debentures: Secured instruments issued for borrowing. They are promissory notes with fixed interest rates, and have priority over equity in liquidation.
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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.
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Description
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.
