Chapters 12 & 13 Chapter 10 Sources of finance
Syllabus guide detailed outcomes Slide 3
Overview Slide 4
Syllabus overview Section A - Financial Management function Section B - Financial management environment Section C - Working capital management Section D – Investment appraisal techniques Section E Sources of business finance Slide 5
Overview – sources of finance Maximisation of shareholder wealth Investment decision Financing decision Dividend decision Short-term finance Slide 6 Long-term finance
Short-term finance Matching approach n Types n ¨ Overdraft ¨ Short-term loan ¨ Trade credit ¨ Leasing Slide 7
Long-term finance Used for major investments n Usually more expensive and less flexible n Types n ¨ Leases ¨ Debt ¨ Equity ¨ Venture Slide 8 capital
Debt finance Bank loans n Many types n Often secured n Loan covenants Bonds / loan notes n Sold to investors Secured / loan covenants n Types n ¨ Redeemable ¨ Irredeemable Floating rate ¨ Deep discount ¨ Convertible ¨ Slide 9
Venture capital Very high growth potential V Very significant amounts Very high returns Slide 11
Equity finance Access to wider pool of finance Higher public profile Higher investor confidence Slide 12 Allows use of share issues for incentive schemes and takeovers Why seek a stock market listing? Allows owners to realise some of their investment
Share issues n Methods of obtaining a listing n Rights issue ¨ Initial public offer (IPO) ¨ Placing ¨ Introduction ¨ Why? ¨ TERP Slide 13
Equity finance n Why seek a stock market listing? n Access to wider pool of finance Allows use of share issues for incentive schemes and takeovers Higher public profile Higher investor confidence due to greater scrutiny Allows owners to realize some of their investment n n Slide 14
Methods of raising equity finance Methods of issuing new shares Cut dividend n Internal funds n Share issue n n n placing rights issue n n Slide 15 public offer stock exchange listing