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LONG TERM FINANCING - Coggle Diagram
LONG TERM FINANCING
BOND
common features of bond
Par value
coupon rate
maturity date
trustee
indenture
call provision(call features)
sinking fund
Type and classification of bond
Foreign or international bonds
yankee bond
samurai bond
Government bond
federal government bond
municipal bond
corporate bond
secured bonds or senior bonds
mortgage bonds
collateral trust bonds
equipment trust certificate
unsecured or junior bonds
subordinated debentures
income bonds
debentures
others corporate bond
serial bond
junk bonds
term bond
zero coupon bonds "zero"
characteristics of bond
priority of claim on earning and assets
there call provison
fixed return
no voting rights
using sinking fund to retire off the bond principal
common stock
advantage
no maturity date, so firm do not have to pay to retire common stock
issuing common stock increase firm financial base and expand future borrowing capacity
no legal obligation to pay common stock dividend
disadvantages
common stock cost hiogher than debt because dividend is not tax deductible and high flotation cost
dilute ownership and control of firm
characteristic of common stock
claim on asset
shareholder has voting right
claim on income
liability is limited to the amount of their investment
no maturity date
preferred stock
Characteristic of preferred stock
payment of dividend is not a legal obligation-character-sama as payment dividend
p/s has priority of claim over common stock in term of asset and earning-character-same of bond
p/s have a par value (usually rm 100.0)
advantage & disadvantage of preferred stock