Finance

Definition: Hybrid Financing is the financial instrument that partakes some characteristics of debt and some characteristics of equity. Simply, it is the financial security that possesses the characteristics of both the debt and equity. The debt and equity are the two extreme points and in the midpoint lies the hybrid financing that offers the investors the benefits of both … [Read more...] about Hybrid Financing

Definition: The Convertible Debentures are a type of loan that can be converted into the stock of the company after a stipulated time period at the option of the holder or the issuer in special circumstances. These are issued with the intent to raise money to expand or maintain the business operations at a considerable low-interest rate. The debentures are the long-term debt … [Read more...] about Convertible Debentures

Definition: The Stock Warrants are like the options that give the holder the right, but not the obligation to buy or sell the security at a specific time and a specific date. Unlike options, these are issued by the company itself and are traded more over the counter than on an exchange. The stock warrants are issued to “sweeten the debt issues”, as with the purchase or sale … [Read more...] about Stock Warrants

Definition: The Employee Stock Options or ESOs is the compensation scheme, wherein the specified employees or executives are granted a certain number of shares of the company. Here, the employee has the right, but not the obligation to buy the company’s shares at a specific time and a specific date. SEBI has issued certain guidelines that the companies listed on a recognized … [Read more...] about Employee Stock Options

Definition: The Stock Option is a security that gives the right to its holder, but not the obligation to buy or sell the outstanding stocks at a specific price and a specific date. The stock options are traded on the securities exchange like other shares. People purchase these stock options if they believe that the stock price is likely to go up or down in the near future. … [Read more...] about Stock Option

Definition: The Sources of Long Term Finance are those sources from where the funds are raised for a longer period of time, usually more than a year. Long term financing is required for modernization, expansion, diversification and development of business operations. Generally, the companies resort to the sources of long-term finance when they have an inadequate cash balance … [Read more...] about Sources of Long Term Finance

Definition: Debentures are the debt instruments used to raise additional capital from the general public, usually backed by the integrity and the creditworthiness of the issuer. Debentures usually offer more flexibility than a term loan as there is more variety with respect to the maturity, security, interest rate, repayment and special features. Debentures are the … [Read more...] about Debentures

Definition: The Term Loan is the primary source of long-term debt raised by the companies to finance the acquisition of fixed assets and working capital margin. It is also called as a term finance which means the money raised through the term loans is generally repayable in regular payments i.e. fixed number of installments over a period of time. Advantages of Term Loan … [Read more...] about Term Loan

Definition: The Preference Capital is that portion of capital which is raised through the issue of the preference shares. This is the hybrid form of financing that has certain characteristics of equity and certain attributes of debentures. Advantages of Preference Capital There is no legal obligation on the firm to pay a dividend to the preference shareholders. The … [Read more...] about Preference Capital

Definition: The Retained Earnings represent that portion of the equity earnings (left after deducting the tax and preference dividends), which is sacrificed by the equity shareholders and is ploughed back into the firm to reinvest these in the core business operations, such as paying off the debt obligations or purchasing a capital asset. In a balance sheet, you often come … [Read more...] about Retained Earnings