course 8 Source of Capital 资本来源.docx

Source of Capital – DebtSource of Funds - CapitalLong-Term CapitalLong-Term Debt CapitalBonds Proceeds at IssuanceBond Amortization Interest ExpenseCapital LeasesDeferred TaxesSource of Funds - CapitalA. Framework Suppliers供应商 - Liabilities - short-term capital Creditors 债权人- Debt - long-term capital Investors 投资者– Equity - long-term capitalLong-term Capital A. Debt Capital借入资本 - Borrower Borrower must comply to遵守 all the terms and conditions (TC) included in the financing agreement Borrower incurs an interest expense for its use of fundsLower cost of debt; interest on debt is tax deductible Borrowers must achieve the agreed financial performance targets (ratios) – covenants Most common ratios to evaluate financing risk Current ratio 流动比率 Debt / Equity ratio Interest (expense) coverage Covenants条款 are outlined in the loan or bond indenture 债券契约(document) If the covenants are not met, debtor债务人 is in default 违约A. Debt Capital - Creditor 债权人 From a creditors standpoint debt capital is less risky than equity capital Can impose financial requirements Can request collateral Can take legal action Creditors are willing to have a lower returnB. Equity capital – Investor Investor (shareholder’s) standpoint Realizes share appreciation Receives dividend More risky from a shareholder’s standpoint No claims on assets Receives dividends at the discretion of management; no share appreciation guarantee Investor expects higher return than creditors3. Long-Term Debt CapitalA. Type of Debt Instruments Term loans notes Loan reimbursed according a specified re-payment schedule Bonds Certificate promising to pay the holder: A specified amount at a stated date – maturity date Interest at a stated rate until the maturity date Long-Term Debt Capital A. Type of Bonds 债券 Serial bonds分期偿还债券 – redeemed赎回 in instalments at specified dates Sinking fund bonds - redeemed in instalments at the discretion of the debtor Mortgage bond抵押债券 – secured担保 by pledged assets质押资产 (buildings, equip