MSCSLIDES5

1MSCMANAGERIAL FINANCE - 5BCU BUSINESS SCHOOL ACCOUNTING & FINANCE2SOURCES OF CAPITAL EXTERNAL & INTERNAL INTERNAL  RESERVES EXTERNAL: SHARE CAPITAL DEBT /LOAN CAPITAL CONVERTIBLES, WARRANTS & SHARE OPTIONS BANK BORROWINGBCU BUSINESS SCHOOL ACCOUNTING & FINANCE3CAPITAL BALANCE MIXADMIN & LEGAL COSTSSERVICING LEVELSINTEREST OBLIGATIONSREPAYMENT OF PRINCIPAL AMOUNT BORROWEDTAX IMPLICATIONSIMPACTS ON EXISTING SHAREHOLDERSDILUTION OF OWNERSHIPBCU BUSINESS SCHOOL ACCOUNTING & FINANCE4FINANCE SUPPLIERS REQUIREMENTSREQUIRED LEVELS OF RETURNLEVELS OF INVESTMENT RISKABILITY TO LIQUIDATE CAPITALTAX POSITIONLEVEL OF CONTROL & INFLUENCE THEY CAN EXERCISEBCU BUSINESS SCHOOL ACCOUNTING & FINANCE5SHARE CAPITALORDINARY SHARE CAPITAL – EQUITIESCONFERS PART OWNESHIP OF THE COMPANYCONFERS RIGHT TO VOTE AT COMPANY’S AGMRIGHT TO PARTICIPATE IN PROFITS IN FORM OF DIVIDENDSDIVIDENDS NOT ASSUREDVALUE OF SHARES CAN RISE OR FALL ON MARKETSLAST TO BE PAID IF COMPANY LIQUIDATESBCU BUSINESS SCHOOL ACCOUNTING & FINANCE6PREFERENCE SHARES ENTITLED TO A FIXED ANNUAL DIVIDEND IRRESPECTIVE OF COMPANY’S PERFORMANCEDO NOT HAVE A VOTEPAID BEFORE ORDINARY SHAREHOLDERSATTRACTS RISK AVERSE INVESTORSBCU BUSINESS SCHOOL ACCOUNTING & FINANCE7PREFERENCE DIVIDEND WORKED EXAMPLE AN INVESTOR HAS 10,000 5% PREFERENCE SHARES 50p  THEY ARE CURRENTLY TRADING AT 120p ON THE STOCK MARKET HOW MUCH DIVIDEND WILL THEY RECEIVE ?BCU BUSINESS SCHOOL ACCOUNTING & FINANCE8PREFERENCE DIVIDEND PAYABLE 10,000 SHARES @ 50p each =£5,000  £5,000 @ 5% = £250 TOTAL DIVIDEND NOTICE DIVIDEND BASED ON NOMINAL/PAR VALUE NOT ON MARKET VALUESBCU BUSINESS SCHOOL ACCOUNTING & FINANCE9DEBT CAPITAL/ LOAN STOCKLONG-TERM DEBTPAYS ANNUAL INTERE...