Day: October 17, 2020

Factoring of Debtors (Receivables) This is the sale of a firm’s debtors to a financial institution known as a factor for immediate cash. The firm and the factor agree on the basic credit terms for each customer. The customer or Read More …

Commercial Paper This is a short term debt instrument issued by financially sound companies (Blue chip companies) so as to raise funds to finance their working capital needs. Is a form of unsecured promissory note, issued by firms to raise Read More …

Bank overdraft This is the permission granted by the bank to its customers to write cheques even though customers have insufficient funds in their accounts. Normally a bank puts a limit for the facility, but so long as the limit Read More …

Business Angels These are wealthy individuals who give funds to the company in exchange of positions. Such individuals are not concerned with the returns or dividends of the company but with the reputation that they get as being the directors Read More …

Venture Capital Venture capital is a form of investment in new small risky enterprises required to get them started by specialists called venture capitalists.  Venture capitalists are therefore investment specialists who raise pools of capital to fund new ventures which Read More …

Retained Earnings (Revenue Reserves) These are undistributed earnings.  Such reserves are retained for the following reasons: To make up for the fall in profits so as to sustain acceptable risks. To sustain growth through plough backs. They are cheap source Read More …

Contributed by the preference share holders. They do not carry voting power and the holders of these shares cannot exercise any control on the affairs of the company. Preference shares have a prior right to fixed dividend form profits and Read More …

Debentures A debenture is a long term promissory note for raising loan capital. The firm promises to pay interest and principal as stipulated. Debentures mature between 10 – 15 years. Interest on debentures is payable twice a year and it Read More …

Bonds refer to both secured and unsecured debt. Both are papers acknowledging debt. They are long term debt instruments that promise to pay interest periodically.   Types of Bonds (a)       Floating rates bonds The coupon rate or contractual rate of Read More …

Features Debt securities are fixed income securities. Interest on debt is an allowable deduction for tax purposes. It is usually secured. It’s provided with conditions. It can be raised faster than ordinary share capital It increases the firm’s gearing and Read More …