CHAPTER 2
Sources of Long-term Finance
LEARNING OBJECTIVES
- Explain the features of ordinary shares and rights shares
- Discuss the pros and cons of debentures and preference shares
- Highlight the features of term loans
- Explain the features of convertible debentures
- Define lease and highlight its true advantages
- Highlight the difference between hire purchase financing and lease financing
INTRODUCTION
Two long-term securities that are available to a company for raising capital are shares and debentures. Shares include ordinary shares and preference shares.* Ordinary shares provide ownership rights to investors. Debentures or bonds provide loan capital to the company, and investors get the status of lenders. Loan or debt capital is also directly ...
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