Important points for shareholders and creditors, Finance Basics

Important Points for Shareholders and Creditors

1. In raising capital, the borrowing firm will constantly question the financial securities in form of preference shares, ordinary shares, debentures, bond etc.

2. In case of bondholders and shareholders the agent is the shareholder who must ensure such the debt capital borrowed is effectively operated without decrease in the wealth of the bondholders. Such bondholders are the principal whose wealth is influenced through the number of the bond and the value of bonds held.

3. Wealth of bondholders = Market value of bonds x No. of bonds /debentures held.

4. An agency conflict or problem of interest between the shareholders (agents) and the bondholders (principal) will arise whenever shareholders take action that will decrease the market value of the bond and through extension, the wealth of the bondholders.

Posted Date: 1/29/2013 1:44:24 AM | Location : United States







Related Discussions:- Important points for shareholders and creditors, Assignment Help, Ask Question on Important points for shareholders and creditors, Get Answer, Expert's Help, Important points for shareholders and creditors Discussions

Write discussion on Important points for shareholders and creditors
Your posts are moderated
Related Questions
Commercial Bank for Short Term Loans Purpose Why Commercial Banks Prefer To Lend Short Term Loans a) Long-term forecasts are not only difficult although also vague as unc

XYZ Ltd. has an average selling price of Rs.10 per unit. Its variable cost are Rs.7 , and fixed cost amount to Rs.170000. it finances all its assets by equity funds. It pays 35% ta


Drawback of Stock Repurchases 1. High price A company may find it not easy to repurchase shares at their recent value and price paid may be higher to the detriment of rem

Conservative Approach - Financing Current Assets An exact similar of asset life along with the life of the funds required to finance the asset may not be possible. A firm that

Net Present Value Method - DCF Technique The method discounts outflows and inflows and ascertains the total present value via deducting discounted outflows from discounted inf

Goals of firm's Credit Standards The goal of the firm's credit policy is to maximize the value of such firm. To complete this goal, the evaluation of investment in receivables

Give an example of how capital budgeting decisions affect a company's value, strategy or operations. Companies always tend to look for capex projects which will add value to

ascascasc

Explain the both Dividend Yield and Earnings Yield Dividend Yield: Dividend yield is the ratio of per share expected dividends, to current market price of share. Earnin