The rights and duties of shareholders are defined from time to time of issue of shares. The rights of shareholders are fixed which can't be altered unless the Companies Act gets modified.
Right issue which shareholders hold of a company under Companies Act, 1956 are as follows:-
Secured premium notes are issued with the warrant which is kind of detached. This can be redeemed after a notice period of 4-7 years. This way it ensures the holder right to apply and get the allotted equity shares. Secured premium notes has lock-in periods during which the interest is not necessarily to be paid for the invested amount.
It also has many options to do the sell back to the holders at par or face value after the lock-in period. As in this only it contains lots of risks as the holder gets one equity share after a fixed period of time.
The advantage and limitation of credit rating are as follows:-
The days for public issues of shares which has to be kept open is around 3 weeks after the closure of the book built issue. As the book built public issue takes around 3-7 working days which can be extended by 3 days if any how any price band case happens against it.
The days for right issues of shares which kept to be opened are 15 days of the clousure of the issue where the allotment and refund of shares takes place and it takes 15-30 days for the issue to be kept open to see and settle down everything.
Capital market is the market in which financial securities have been traded between the individuals and the institutions. These institutions sell securities on capital markets in public and private sectors to raise funds. This market is composed of both primary and secondary markets. The parts of capital markets are both stock and bond markets.
Large Corporation grow by doing innovations and by raising the capital to finance expion. Corporations have five primary methods which are used to raise funds in capital market.
Capital budgeting is a process making system which is used to select and evaluate long term investments that is fixed assets investigation. It requires initial outlay and it also expect to produce the benefits and result over a period of over a year. The importance of capital budgeting is that the proper decision can be made after seeing the capital budget increases the firm's value and also the shareholders' wealth. It is a critical measuring tool for a company which helps the firm to stay in competition as the expion of the business takes place for example purchasing of equipments to produce additional and new products.
Yes, a company can make public issue of equity shares if partly paid shares are not fully paid as equity shares are that part of share capital of company which is not been included in the preference shares. The condition which has to be considered for this is that at any time after 2 years of expiray from the date of starting of company or after 1 year of shares allotment, public company shares the issues within the authorised area, and directors must decide to offer shares to existing holder of equity shares in proportion to capital which has been paid up on the holder's shares at the time of further issue.
Following are the advantages:
The Risks are as follows:-
Debenture Redemption Reserve is non-convertible debentures which has to be created by seeing the profits and the shares as more it grows more the amount will be collected. For this an upto date commercial project finance has to be produced and provided so that creation of the DRR can be done. If there is a profit and the utilization of the profit has to be done then the DRR can be created either in higher amounts or in equal instalments for a long duration of time.
If residual profits after trfer to DRR are not enough to distribute the dividend then companies are allowed to distribute the dividend from general reserves for certain years. DRR takes only 50% of the amount of debenture issue which has been created through the process.
Floating rate notes (FRNs) are the bonds which have a comparable ratio with the money market reference rate and they are also termed as variable coupon. It is made up of federal funds rate and spread which is the rate that remains constant. FRNs got the coupons where the holders can pay out the interest every three months and this is also called as quarterly coupons.
Zero coupon bonds is also termed as discount bond or deep discount bond which is been bought at a price lower than its face value which will be given back at the time of maturity. This type of bond doesn't make payments of interest in periods. It has already been paid when the bond reaches to the maturity level and its investors are in great advantage of receiving huge about of sum equal to the initial investment Example includes U.S. Treasury bills. It is used or both long term and short term investments.
The minimum subscription which is required for a company to utilize funds as follows:-
Reserve bank issue under the denominations, includes the issue of rupees and all the Non Bank Finance Companies (NBFCs) are also come under Reserve Bank of India, and also the need to do the issue which is greater than Rupees 100 crore are subject to the financial standards, which can be reported the requirements which will be considered as fair practice. The company which has to also maintain records and see that the system is robust and can be taken further without any complications.
Bankers to the issue is the collection of activities which are performed by the banker to an issue such as submission of application, application with money from investors. To adhere to the rules a certificate has to be obtained by a person from SEBI which grants the registration on the basis of all the activities performed by the banker to an issue. The requirements are as follows:-
Minimum subscription is the term which is used to represent the amount of the issue which has to be subscribed or else the shares can't be issued if it is not being subscribed. Company which is offering the shares to the public then they set a specific amount for the subscription which can be taken by the public in order to issue the shares.
Promoters in the unlisted companies contribute at most 20% of post-issue capital. Promoters also help in shareholding which offers for sale and it shouldn't be less than 20%.
In the unlisted companies also securities which are issued to promoters at a low price which is lower than the equity gets offered to public and it doesn't remain eligible for promoters contribution.
Contribution of the promoters are considered by post-issue capital where the promoter contributes through some optional convertible security and it is also been there to public.
Calculation of the present value :- in this the worth of the future sum is given and the specified rate of return is been shown. It has lots of variations in this is that the future cash flow are discounted at the discount rate and it also represents the low present value of future cash flow.
There are many agencies which perform credit rating in India they are as follows:-
This company provide the credit rating information about the companies and allow to give the worthiness of a company and corporation.
The eligibility criteria which have to be satisfied by the Unlisted Company to make public issue are as follows:
Company decides the amount of premium on redemption and period of conversion for debentures as the period of conversion which has been there in SEBI is restricted to only 36 months. If any conversion has to be made then the credit rating is required.
The premium on redemption and period of conversion for debentures has to be stated clearly and it should be predetermined in the prospectus. The company is then free to determine the rate of interest which will be payable according to the company guidelines.
Merchant bank is used in the case of private equity investment where unregistered securities of either privately or publicly held companies are also involved in it. Bank offering different services to the public/private companies is known as merchant bank. It includes both commercial and investment banks. The functions which are performed by the merchant bank when the company wants to raise funds from intermediaries as follows:-
Steps which are taken to control the capital budgeting process are as follows:-
Profitability index (PI) is also known as profit investment ratio (PIR) and also termed as value investment ratio(VIR) which tells that a proposed project will have the ratio of payoff to investment. It is like a tool which is used for ranking projects and it allows quantifying the amount of value created per unit of investment. If the value of profitability index is less than 1 then accept the project and if it is greater than one then reject the project. Another way to calculate the profitability index is future cash flows divided by the initial investment.
Period is not involved with the time value of money and it doesn't even get considered whereas discounted pay back period is another form which involves this and have the real value of cash inflows which are measured in current amount of money which are given as a discount amount. The rate with which they are given at any interest rate are called as Discount rate.
Paybck period= year before recovery+ unrecovered cost at the start of year/ cash flow during the year
Underwriting is a process which refers to the services which have been given to the client without finding out that the client is eligible to receive those services or not from the large financial institution. It also shows the risk management which might be useful in financial activities. It is used in professional field to describe the methods which are related to loan or insurance or to the bank that buys up new insurance or debt. It is basically based on the actuarial science which is a study of risk assessment by the use of various mathematical and statistical methods under the finance industry. The two important terms under which this is used are as follows:-
The eligiblity criteria which need to be satisfied by the listed company to make a public issue are as follows:-
The factors which has to be taken into consideration while computing the cash outflows and cash inflows are as follows:-
The different types of venture capital financing depends on the investment of specific purpose within the life of target company as the high return rate of the company remains constant and it has no effect on it. There are three types of venture capital financing:-
Early Stage Financing which is divided into three parts of its own they are as follows:-
Expion Financing is also subdivided into three parts namely as:-
Acquisition or Buyout Financing- in this acquisition and management finance are used which assist the company to have certain parts or entire company under themselves. It is also termed as leveraged buyout financing. This also helps in the management group to obtain a particular product from another company by collaboration.
There are many responsible personalities who take up the decision in the denomination of shares in public issue of the company and they people are as follows:-
Venture capital is a capital which provides high potential interest generating returns from the growing companies at very early stages. The return which will be generated is through the sale of the company.
This term usually generated from the institutional investors and high net worth individuals which has been working together on a dedicated investment firms. The main importance of it is that it generates high interest returns at very early stages and at a growing pace. It also has high-end companies which supports it in reaching the peak.
Credit rating is obligatory when the lenders need to share some information about you and it is also been done to protect their interest that the client will one day repay the loan. In this what happens is that all the lenders remain in the sync with each other and keep the information of the client with each other so that they can share the information together because if a lender gives money to the client then tomorrow if another client gives the money to the same client then it becomes difficult for the client to pay it off the loan which has been taken so they both can collaborate together to prevent this misunderstanding.
In the case of pay back period technique which is used for evaluation of capital expenditure proposal in which the cash inflows are even and constant and the period can be computed by dividing the original investment to the annual cash-inflow. This can be also represented in number of years which are required to recover the original cash which has been invested in the project. This the method which is used to measure the period of time as it takes for the original cost of the project which has to be re3covered from the earning which are additional to the project.
Internal rate of return is used to calculate the even break point which is also an alternative way to calculate the cost of capital and it includes the risk premium. It is the rate of return which is used in capital budgeting which gives the indication of the profitablility of investments. This is also called as discounted cash flow rate of return. This can't be used for mutually exclusive projects where the selection can be done to only one project rather than both the projects.
Secured premium notes are issued with the warrant which is kind of detached. This can be redeemed after a notice period of 4-7 years. This way it ensures the holder right to apply and get the allotted equity shares. Secured premium notes has lock-in periods during which the interest is not necessarily to be paid for the invested amount. It also has many options to do the sell back to the holders at par or face value after the lock-in period.
SEBI guidelines for the issue of debt instruments are as follows:-
CRISIL is a methodology of the credit rating which reflects its current opinion on the likability of the payment of interest and principal. This methodology is an unbiased, objective, and independent opinion which is designed to met the financial obligations of the issuer.
This methodology includes non-convertible debentures/bonds, commercial certificates, fixed deposits, debt and lo. It is based on clear and robust framework, which ensures the standard, comparable and effective communication of ratings which are assigned.
Capital budgeting limitations are as follows:-
Equity warrants are the kind of warrants which can be put or called. It is like an option which gives the holder to buy the security related to its option at a certain price, quantity and time. It is issued by the company. The two warrants which come under this are as follows:-
Discounted cash flow:- in finance it is the analysis of a method which talks about the value of the project, company and the asset which is being used using the time value of money. In this all estimation has been taken and discounted for the present value as it shows both incoming and outgoing. This kind is used for investment of the finance and used for financial management.
The acceptance rule is the rule which is used for the communication purpose and it is used in unilateral contracts which makes an offer and will be accepted by some act. This rule also determines whether the agreement is from both sides or not. The offer may only be accepted if the offerer is the person for whom the offer is made. If the offer is accepted then the offer can be accepted without any modification.
Accounting rate of return is also know as Average rate of return which gives the financial ratio used in capital budgeting. The ratio takes time value of money factor which calculates the return and the net income can be generated from the proposed capital investment. It is used to show the percentage return. The formula of computation is:
ARR= Average profit/average investment
Cash flow is the movement of the money in and out of the business which results in high availability of the cash. The cash flow calculation is simple and it is calculated by adding the after tax income and bookkeeping expenses that result in deduction of the items which has not be paid out in cash. The cash flow in few months will be negative only which should not be taken as a negative sign as it won't effect the business much. The cash balance should not go below zero as it will be same as negative balance in the account.
Time value of money is the value which is earned over a given amount of time in terms of interest. For example if Rs. 200 money will be invested for about 1 year then the earning will be of 5% interest which will be worth 205 after one year. So using this time value of money terminology the future value can be predicted.
The techniques which are available for the evaluation of capital expenditure proposal depend on the management which has to select and have the profitable proposal out of different proposal under study. The technique which is used are as follows:-
Minimum application which is required if equity shares are being issued at par is that the company should have a nationwide trading terminal for the duration of at least 1 year. The other applications which are necessary for doing this are as follows:
The advantages of equity warrants are as follows:-
The risks of it are as follows:-
Credit rating is the rating which gives the estimate of the individual company, corporation of country's worth. Credit bureau makes an evaluation of borrower's credit history and then according to that the actions on it take place. Credit rating shows the ability of the borrower to pay the debt to the lender on request to the credit bureau. The calculation of it depends on the financial history, current assets and liabilities. The probability of a borrower to pay back of its loan can be seen by this which tells a lender or investor about it.
The main features which are involved with the credit ratings are as follows:-