1. 1Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. KITNE SOURCE HAIN ---------------

2. Sources of Funds and Capital Structure Rahul jain

3. 3Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Equity Shares–Features Claim on Income Claim on Assets Right to Control Voting Rights Limited Liability

4. 4Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Ordinary Shares–Pros and Cons Advantages 1. Permanent Capital 2. Borrowing Base 3. Dividend Payment Discretion Disadvantages 1. Cost 2. Risk 3. Earnings Dilution 4. Ownership Dilution

5. 5Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Right Shares – Pros and Cons Advantages 1. Control is maintained 2. Less flotation cost 3. Issue more likely to be successful Disadvantages 1. Shareholders lose if fail to exercise their right

6. 6Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Debentures–Features Interest Rate Maturity Redemption Sinking Fund Indenture Security Yield Claim on Assets and Income

7. 7Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Types of Debentures Non – Convertible Debentures Fully – Convertible Debentures Partly – Convertible Debentures

8. 8Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Debentures–Pros and Cons Advantages 1. Less Costly 2. No ownership Dilution 3. Fixed payment of interest Disadvantages 1. Obligatory Payment 2. Financial Risk 3. Cash outflows 4. Restricted Covenants

9. 9Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Term Loans–Features Maturity Direct Negotiations Security Restrictive Covenants 1. Asset related covenants 2. Liability related covenants 3. Cash flow related covenants 4. Control related covenants Convertibility Repayment Schedule

10. 10Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Preference Shares Similarity to Ordinary Shares: 1. Non payment of dividends does not force company to insolvency. 2. Dividends are not deductible for tax purposes. Similarity to Debentures: 1. Dividend rate is fixed. 2. Do not share in residual earnings. 3. Usually do not have voting rights.

11. 11Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Preference Shares–Features Claim on Income and Assets Redemption Sinking Fund Convertibility

12. 12Financial Management, Ninth Edition © I M Pandey Vikas Publishing House Pvt. Ltd. Preference Shares–Pros and Cons Advantages 1. Risk less Leverage advantage 2. Dividend postponability 3. Fixed dividend 4. Limited Voting Rights Disadvantages 1. Non-deductibility of Dividends 2. Commitment to pay dividends