CORPORATE FINANCE

Group-A
❖Bibechana Bhattarai
❖Bishal pangeni
❖Trishana kshetry
❖Anisha Dhakal
❖Shila Gautam
❖Minu Magar
 INTRODUCTION
Long term Debt
Long term debt refers to financial obligation
that extend beyond a year such as loans or
bonds with maturity dates exceeding 12
months.It represents a company liabilities
requiring repayment over an extended
period. It typhically involves borrowing a
significant amount of money that need to
be repaid over on extended period often
several years.
 Long -term debt instrument
A long term debt instrument is a financial tool or
document represting a long-term borrowing
arrangement .these instrument are used by entities
such as corporations or government, to raise capital
for various purposes.example including,
▪ Bonds
▪ Long-term loans
▪ mortgages
Features of Long-term Debt

❖Principle or par value

❖Coupon interest rate
❖Maturity period
❖Indenture
❖Call provision
❖Sinking fund provision
❖Convertibility
Types of corporate bond
❖Mortgage Bond
❖Debenture or unsecured Bond
❖Convertible Bond
❖Callable Bond
❖Redeemable Bond
❖Income Bond
Advantages of corporate bond
The main benefits to the issuers and investors from
the use of debtors and long-term loan are as
follows:
❖Fixed cash cost: payment to the lender for
issuing the bond interest is predetermind
regardless of the increase in the profit of the
organization.
❖No control :Lenders do not have the rights to
attend shareholders meetings vote and elect
directors excent in special circumstances.
❖Low cost of financing :the rate of return of
shares is not fixed but the interest rate is fixed.
❖Tax advantages :Dividends paid on ordinary
share and preferred shares cannot be
dedicated as expenses from taxable income.
❖Flexibility : Most bonds like many have a fixed
maturity period during which the old debt is
repaid similarly if a call provision is mentioned
in the loan agreement such loan can be
returned at any time in the future.
Disadvantages of corporate bond
The following are the disadvantages of using
debenture:
❖Fixed obligations: A fixed obligation with
regular interest payment and maturity.in the
end the executor has the legal responsibility to
return the loan if the responsibility cannot be
fulfil.
❖Risky: The return of long term loans is very long
but the future financial situation of the
company cannot be fully predicated.
❖More Restriction: Restrictions on what the
company can do freely in the loan agreement
as restriction provisions of the nature of
imposing and depriving the company of
certain actions.
❖ Higher indirect cost : Generally the interest
rate and financial cost of debt capital is lower
then financial cost of equity capital but as the
use of debt capital increase the property
(claim)of the share holder decrease the risk.
COMMON STOCK

The rate of dividend is not fixed and there is no

maturity period but the mayor who has control over
the operation of the company is called common
stock .Ordinary shares refers to equity or owners
capital .For the operations of the company the
common shareholders are selected by the directors
from whom the management of company is done.
The share of income to be received by ordinary
share is not predetermind but the remaining profit is
distributed as dividends.
Features of common stock
❖Par value
❖No fixed dividends
❖No fixed maturity
❖Limited liability
❖Voting rights
LEGEL RIGHTS AND PRIVILEGES OF COMMON
STOCKHOLDERS
Common stockholders typically have the rights
to vote on certain company matters such as the
election of board members they may also
receive dividends though these are not
guaranteed.
❖Voting Rights :Common stockholders usually
have the right to vote on important company
decisions, such as the election of board
members and certain corporate policies.
❖Dividend Entitlement : Common stockholders may
receive dividends which are a portion of a
company profits distributed to shareholders.
❖Residual claim on assets :In the event of
liquidation common stockholders have a claim on
the company remaining assets after all debt and
preferred stock obligations are satisfied.
❖Preemptive Rights : some common stockholders
may have preemptive rights allowing them the
option to purchase additional shares before the
company offer them to public maintaining their
proportional rights .
ADVANTAGES OF COMMON STOCK

❖No fixed dividend : Common stock does

not have a fixed dividend dividend based
on how well company doing.
❖No fixed maturity : Common stock does
not have a specific end date so issuer do
not have to worry about repaying the
principle amount.
❖Increase in creditworthiness : By issuing
common stock companies can improve
their financial reputation making it easier.
Easy to issue: Issuing common stock is a
straight forward process in which
company can offer it to investor
through ipos on subsequent
stock offerings by quickly raise
capital without too much.
Disadvantages of common stock
❖High cost financing
❖High flotation cost
❖No tax deductibility
❖Dilution of control
❖Uncertain income to investor
THANK YOU

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