Long-term Finance- “Shares”

Management of Financial Resource

Long-term Finance

• Borrowed Capital that will be repaid over a specific time period longer than five years.

Sources Of Long-term Finance

• Shares• Public Deposits• Debentures• Various Financial Institutions

“Shares”

• Shares are the most common form of raising long term finance from market (share market).

Preference Shares

• These shares are those which are given preference as regards to payment of dividend and repayment of capital.

Cumulative Preference Shares

• Unpaid Dividends which are carried forward for subsequent years and then paid off in full are called as Cumulative Preference shares.

Non – Cumulative Preferenceshares

• Those Shares which have right to get fixed rate of dividend out of the profits of the current year only.

Redeemable Preference Shares

• Those preference shares, which can be repaid after the expiry of a fixed period.

Non – Redeemable PreferenceShares

• Those shares which cannot be redeemed or repaid during the life time of the company.

Participative Preference Shares

• Those Preference share, which have right to participate in any surplus profit of the company after paying the equity shareholders.

Non – Participative PreferenceShares

• Preference shares, which have no right to participate on the surplus profit of the company.

Convertible Preference Shares

• Those Preference shares which can be converted into Equity Shares are called Convertible Preference shares.

Non – Convertible PreferenceShares

• Preference shares, which are not convertible into Equity shares are called Non – Convertible Preference Share.

Equity Shares

• These are the shares which do not enjoy any preference regarding payment of dividend and repayment of their capital.

Types of Equity Shares issued by companies

• Blue Chip Shares• Income Shares• Growth Shares• Cyclic Shares• Defensive Shares• Speculative Shares.

Blue Chip Shares

• These are the shares of some of the companies which have been doing extremely well in the past few years. These are usually well established Companies.

Income Shares

• These are the shares of the companies which have stable operations. The companies have a high dividend payout ratio.

Growth shares

• These are the shares of companies which have secured their positions in a particular Industry. These shares have less dividend payout ratio and hence high growth potential.

Cyclical shares

• These are the shares of company whose performance varies with the stages of the cycle.

Defensive Shares

• These are the shares of the company whose performance does change with the changes in the economy.

Speculative shares

• These shares are the shares which are traded in the company which have a lot of speculations.

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