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Shares are one of the sources of long term finance. In this presentation shares and types of shares are explained.
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Long-term Finance- “Shares”
Management of Financial Resource
Long-term Finance
• Borrowed Capital that will be repaid over a specific time period longer than five years.
Sources Of Long-term Finance
• Shares• Public Deposits• Debentures• Various Financial Institutions
“Shares”
• Shares are the most common form of raising long term finance from market (share market).
Preference Shares
• These shares are those which are given preference as regards to payment of dividend and repayment of capital.
Cumulative Preference Shares
• Unpaid Dividends which are carried forward for subsequent years and then paid off in full are called as Cumulative Preference shares.
Non – Cumulative Preferenceshares
• Those Shares which have right to get fixed rate of dividend out of the profits of the current year only.
Redeemable Preference Shares
• Those preference shares, which can be repaid after the expiry of a fixed period.
Non – Redeemable PreferenceShares
• Those shares which cannot be redeemed or repaid during the life time of the company.
Participative Preference Shares
• Those Preference share, which have right to participate in any surplus profit of the company after paying the equity shareholders.
Non – Participative PreferenceShares
• Preference shares, which have no right to participate on the surplus profit of the company.
Convertible Preference Shares
• Those Preference shares which can be converted into Equity Shares are called Convertible Preference shares.
Non – Convertible PreferenceShares
• Preference shares, which are not convertible into Equity shares are called Non – Convertible Preference Share.
Equity Shares
• These are the shares which do not enjoy any preference regarding payment of dividend and repayment of their capital.
Types of Equity Shares issued by companies
• Blue Chip Shares• Income Shares• Growth Shares• Cyclic Shares• Defensive Shares• Speculative Shares.
Blue Chip Shares
• These are the shares of some of the companies which have been doing extremely well in the past few years. These are usually well established Companies.
Income Shares
• These are the shares of the companies which have stable operations. The companies have a high dividend payout ratio.
Growth shares
• These are the shares of companies which have secured their positions in a particular Industry. These shares have less dividend payout ratio and hence high growth potential.
Cyclical shares
• These are the shares of company whose performance varies with the stages of the cycle.
Defensive Shares
• These are the shares of the company whose performance does change with the changes in the economy.
Speculative shares
• These shares are the shares which are traded in the company which have a lot of speculations.
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