tailieunhanh - Lecture Fundamentals of financial management (13/e) - Chapter 20: Long-term debt, preferred stock, and common stock
In chapter 20, we examine the major long-term securities issued by firms to provide for their long-term financing needs – long-term debt (bonds), preferred stock, and common stock – and evaluate their features. Also, in the Appendix to this chapter we analyze the potential profitability of a company refunding (replacing) an existing bond issue with a new one. | Chapter 20 Long-Term Debt, Preferred Stock, and Common Stock © 2001 Prentice-Hall, Inc. Fundamentals of Financial Management, 11/e Created by: Gregory A. Kuhlemeyer, . Carroll College, Waukesha, WI Long-Term Debt, Preferred Stock, and Common Stock Bonds and Their Features Types of Long-Term Debt Instruments Retirement of Bonds Preferred Stock and Its Features Rights of Common Shareholders Dual-Class Common Stock Bonds and Their Features Basic Terms Par Value Coupon Rate Maturity Bond Ratings Bond -- A long-term debt instrument with a final maturity generally being 10 years or more. Trustee and Indenture Trustee -- A person or institution designated by a bond issuer as the official representative of the bondholders. Typically, a bank serves as trustee. Indenture -- The legal agreement, also called the deed of trust, between the corporation issuing bonds and the bondholders, establishing the terms of the bond issue and naming the trustee. Types of Long-Term Debt Instruments Investors look to the earning power of the firm as their primary security. Investors receive some protection by the restrictions imposed in the bond indenture, particularly any negative-pledge clause. A negative-pledge clause precludes the corporation from pledging any of its assets (not already pledged) to other creditors. Debenture -- A long-term, unsecured debt instrument. Types of Long-Term Debt Instruments In this case, subordinated debenture holders rank behind debenture holders but ahead of preferred and common stockholders in the event of liquidation. Frequently, the security is convertible into common stock to lower the yield required by subordinated debenture holders (often less than regular debentures). Subordinated Debenture -- A long-term, unsecured debt instrument with a lower claim on assets and income than other classes of debt; known as junior debt. Types of Long-Term Debt Instruments Frequently, there is a cumulative feature, which provides that any unpaid interest in a . | Chapter 20 Long-Term Debt, Preferred Stock, and Common Stock © 2001 Prentice-Hall, Inc. Fundamentals of Financial Management, 11/e Created by: Gregory A. Kuhlemeyer, . Carroll College, Waukesha, WI Long-Term Debt, Preferred Stock, and Common Stock Bonds and Their Features Types of Long-Term Debt Instruments Retirement of Bonds Preferred Stock and Its Features Rights of Common Shareholders Dual-Class Common Stock Bonds and Their Features Basic Terms Par Value Coupon Rate Maturity Bond Ratings Bond -- A long-term debt instrument with a final maturity generally being 10 years or more. Trustee and Indenture Trustee -- A person or institution designated by a bond issuer as the official representative of the bondholders. Typically, a bank serves as trustee. Indenture -- The legal agreement, also called the deed of trust, between the corporation issuing bonds and the bondholders, establishing the terms of the bond issue and naming the trustee. Types of Long-Term Debt Instruments .
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