财务管理英文Chapter20.pptVIP

Chapter 20 Long-Term Debt, Preferred Stock, and Common Stock Chapter Objectives Explain the characteristics of debt. Identify the different types of debentures. Outline the provisions of a Bond Covenants. Discuss the different features of both preferred stock and common stock. Solution for Chateau Teyssier Chateau Teyssier, an English vineyard, was seeking cash to purchase some additional vines and to modernize its production facilities. Their solution is to issue 375 bonds, each costs 2,650 British bonds. The issue raised nearly 1 million pounds, which is roughly $1.5 million. What makes these bonds interesting is that, instead of getting paid with money, the bonds pay their investors with wine. Each June until 2002, when the bonds mature, investors will receive their “coupons.” between 1997 and 2001, each bond will provide six cases of the vineyard’s rose or claret. Starting in 1998 and continuing through maturity in 2002, investor will also receive four cases of its prestigious Saint Emilion Grand Cru. Then, in 2002, they will get their money back. Maturity Bill Zero-coupon debt security with one year or less to maturity at the maturity date. Note Medium-term debt security with maturity at issue of 1 to 10 years. Bond A long-term debt instrument with a final maturity generally being 10 years or more. Methods Of Classifying Long-Term Debt Methods Of Classifying Long-Term Debt Methods Of Classifying Long-Term Debt Bond Covenants Bond covenants (also called bond indenture): the rules that specify the rights of the lender and the restrictions on the borrower. Provisions included in the indenture Why do we need covenants? Bond Covenants (Cont.) Major kinds of bond covenants: Assets covenants Dividend covenants Financing covenants Bonding covenants Financial ratio covenants Sinking fund covenants. Not all of these types of covenants are included in every bond. Bond Covenants (Cont.) Assets covenants Govern the firm’s acquisition, use, and disposition of as