...TYPES AND SOURCES OF CORPORATE DEBT AND BOND COVENANTS Corporate debts may be short term or long term in nature. Short - term debts are incurred by the company in relation to its supplies of raw materials categorized as accounts payables and are normally paid within the accounting cycle or within one year. In the balance sheet, they fall under the current liabilities. These are supposed to be financed through the company’s current assets. Long term debts are those acquired by the company from banks and through issuance of bonds. For loans from banks, the requirements of the lenders are normally: evidences of the company’s sound financial standing as reflected in its financial statements, effective management, nature of products (quality), and good track record of credit relationship with other fund providers. At times, they must be backed by collaterals. Another option by which a company acquires addition funds is to issue bonds. This is a long term obligation of the company (issuer) to the bondholder to pay fixed interest rates periodically until the maturity date when the company must have to return the par value to the bondholder and terminates or redeem the bond. Hence, the financial obligation of the issuer or the company who opted to issue bonds for additional funds are: periodic fixed interest payments until the maturity date and the payment of the par value of the bond on the maturity date. The income of the bondholder is the periodic interest received (for coupon...
Words: 1145 - Pages: 5
...FISV 3040 Money & Capital Market Research Paper On Financial System Reform Presented to Professor Jean Holt October 29, 2015 Prepared by Yi Que Abstract: 1998-2013: An Analysis of the Tangible and Intangible Costs of Financial Regulatory Reform and Deregulation (The Financial Institutions Deregulation and Reform Act 1999* and the Dodd-Frank Act 2010) on United States Capital Markets and Institutions as measured by Debt Loan Types and Bank Profitability. Key words: Glass-Steagall Act, Financial Institutions Deregulation and Reform Act, Dodd-Frank Act, investment bank, financial statements. II. Table of Content I. Cover Page1 II. Table of Content2 Abstract, key works2 III. Introduction3 IV. Statement of Problem5 V. Background12 V. Results from Research & Summary13 VI. Works Cited 14 III. Introduction United Sates financial reform dates from the last century, in 1930s’ Great Depression. To have a brief talk about US financial reform, which is a long and arduous project. Aim to reach the goal that has to include three important acts: Glass-Steagall Act, Gramm-Leach-Bliley Act, and Dodd-Frank Act. Throughout history, the financial system in US has experienced the mixed operation and separated operation processes, as well as various financial institutions and regulatory authorities continue to be perfected. US financial reform and innovation continue to promote the US economy continues to develop and progress. Next, I will briefly introduce each act in the basic...
Words: 2861 - Pages: 12
...accepted 22 October 1999 a Abstract This study examines the relationship between the capital structure of multinational corporations (MNCs) and their diversification strategy. Both the international market (multi-country operations) and the product (multi-industry operations) dimension of diversification are integrated into the analysis and a switching of regression regimes methodology is employed that accounts for the bi-dimensional nature of the diversification strategy pursued by MNCs. The model identifies four types of diversification regimes. The results suggest that leverage increases with both international and product diversification. It is also found that the combination of both types of diversification leads to lower levels of bankruptcy risk. Although the role of the determinants of MNC capital structure varies with the diversification strategy, there seem to be common determinants. In particular, profitability and bankruptcy risks are negatively related to the debt ratio of MNCs. © 2001 Elsevier Science B.V. All rights reserved. JEL classification: F23; G32 Keywords: Multinational corporation; Capital structure; International diversification; Product diversification * Corresponding author. Tel.: + 1-418-6562131, ext. 3380; fax: +1-418-6562624. E-mail address: jean-claude.cosset@fas.ulaval.ca (J.-C. Cosset). 1 Tel.: + 1-613-5625800; fax: + 1-613-5625164, e-mail: chkir@admin.uottawa.ca...
Words: 10717 - Pages: 43
...with a different type of bankruptcy) but the bankruptcy laws of each state also play an important part; consequently, though there are bankruptcy kits, you will probably need a lawyer to successfully file and a lawyer search should focus on a bankruptcy attorney or bankruptcy law firm licensed in the debtor’s state of residence. The attorney licensed in your state can tell you how to file for bankruptcy in a federal court within your state. American bankruptcy is actually a form of relief granted by a court, so it is not so much a matter of a debtor “declaring bankruptcy”; rather, someone files a petition requesting that the court discharge or reduce or restructure debts in bankruptcy. In American bankruptcy, a federal court manages a debtor’s property to protect the debtor from his/her creditors and to benefit the creditors as much as possible under the circumstances. While bankruptcy is designed for long-term relief, one of the most important features of filing for bankruptcy is the “automatic stay.” When a petition is filed for bankruptcy, either by the debtor (“voluntary bankruptcy”) or by one of his/her creditors (“involuntary bankruptcy”), most collection efforts such as utility shut-offs, foreclosures, evictions, garnishments and lawsuits, are immediately stopped. There are types of bankruptcy covering all sorts of debtors but the 4 types used by most American debtors are Chapter 7, Chapter 11, Chapter 12 and Chapter 13. Addressing each type of bankruptcy, from...
Words: 960 - Pages: 4
...Young People – group description 3.2 Definition of credit and its different types 3.3 Young people and debt 3.4 Debt management 4. Conclusion 5. Recommendations 1. Introduction This Report was compiled by Monika Kapral for a committee called the ‘Student Advice Bureau’ at Edinburgh College as their office deals with young people and their financial difficulties. Young People and debt report outlines and analyses the young people issues of credit and debt. Information included in the report will describe young people group, will give definition of credit and show different types of credit use by young people. Information about why young people are in debt and what are consequences will be presented. This report will also outline agencies which can help with debt management, where they are, and what they do. The conclusions will be drawn and recommendations which could help young people will be made. 2. Procedure The information was compiled using secondary research – internet research and all information is coming from reliable resources such as www.cccs.co.uk, www.adviceguide.gov.uk , www.infohub.moneyadvicetrust.org . 3. Findings 3.1 Young people – group description. Young people are a group of economical active 18 – 29 years old people, who are in education, employment or who are unemployed. Some of them may have issues with debt and credit because of growing living costs, not enough financial support during...
Words: 1312 - Pages: 6
...Robert Carroll Econ 394 Essay 2 10/28/15 Moral Duty of Debt When thinking of debt as a “promise to pay” it is only natural to feel the obligation to fulfill that promise. However, not all debts are the same and the sense of duty to repay different debts can certainly vary. The type of debt, reason for the debt, and who the lender can all affect the willingness to pay the debt back. Some debts may seem unfair, while others are clearly the result of your own conscious decision to take it on. There are many factors that can affect one's willingness to pay back a debt, whether it be penalties on defaulting or just a sense or a moral obligation to keep that promise. Although most people intend to pay back their debts, there are certainly some circumstances that I wouldn't absolutely pay back a debt. There are certain debts that I believe should absolutely be paid back. I would absolutely pay back any debts that are the result of my own conscious decision to borrow money for assets. For example, I would always pay back car loans. If I am buying a car that requires a loan, the chances are I could find one that is more affordable. However if I wanted to buy a more expensive car and take out a loan for it, I would make it my obligation to pay the loan back. The reason for this is not only a moral obligation but also for the sake of society's ability to borrow at all. If everyone decided to borrow money for things and not pay it back, our economy would collapse and no one would...
Words: 1054 - Pages: 5
...MP A R Munich Personal RePEc Archive The Pecking Order, Trade-off, Signaling, and Market-Timing Theories of Capital Structure: a Review Anton Miglo University of Bridgeport 2010 Online at http://mpra.ub.uni-muenchen.de/46691/ MPRA Paper No. 46691, posted 6. May 2013 19:07 UTC The Pecking Order, Trade-off, Signaling, and Market-Timing Theories of Capital Structure: a Review Anton Miglo Associate professor, University of Bridgeport, School of Business, Bridgeport, CT 06604, phone (203) 576-4366, email: amiglo@bridgeport.edu. This version: 2013 Initial version: 2010 Abstract. This paper surveys 4 major capital structure theories: trade-off, pecking order, signaling and market timing. For each theory, a basic model and its major implications are presented. These implications are compared to the available evidence. This is followed by an overview of pros and cons for each theory. A discussion of major recent papers and suggestions for future research are provided. Introduction The modern theory of capital structure began with and the famous proposition of Modigliani Miller (1958) that described the conditions of capital structure irrelevance. Since then, been changing these conditions to explain factors driving capital many economists have structure decisions. Harris and Raviv (1991) synthesized major theoretical literature in the field, related these to the known empirical evidence, and suggested promising avenues for future research. They argued...
Words: 8184 - Pages: 33
...move or transfer Technically To make a transfer of a debt from one debtor to the debtor account of another To transfer a debt from one person (debtor) to another with the same price, it comes to the consequence than the liability of the debtor is abolished. In other words, the first obligator is freed from any financial obligations. Hiwalah is a contract which caused the transfer of debt from one party to another. According to Mughni Muhtaj, the term hiwalah is refer to the debt transfer from a party/person to another. Through the transfer of a claim of a debt. the responsibility for its settlement is shifted from one person to another. Hiwalah is similar to the sale of debt but is not sale, it also resemble kafalah and wakalah. However. it is a unique contract which has its own distinct features and condition. The three important participants in a hiwalah contract are: the principal debtor, the creditor and the transferee. When a valid hiwalah is concluded, the debt is no longer demanded from the principal debtor. this is because in hiwalah, the debt is transfered from the principal debtor to the transferee. Furthermore. hiwalah establishes a right for the creditor to demand the settlement of debt from the fransferee. Evidence Hadith • The prophet S.A.W: “The deferment (of paying debt) by the richer is an injustice. When there is one of you, get the offer from other to transfer your debt to another person, just accept it” • In Riwayat Ahmad...
Words: 828 - Pages: 4
...different type of options that could achieve success for an organization. This includes debt and equity financing and which option is better for certain organizations. The writer will then conclude with his recommendations which could accommodate certain industries. These options allow team of analysts to better serve a business in order to successfully operate or expanding. Debt Financing As organizations try to succeed in the business world many often are left in the red do to many factors which could include lack of management and lack of experience in running a business. When this occurs to and organization there happens to be an option which could allow them to receive financing in order to continue daily operations for the business. When an organization take on debt in order to build from a hole they find themselves in they consider debt financing. When the organization acquires a debt through acceptance of a loan that is in contract stating that the owner is agrees to repay the money not only that was borrowed but also interest where the financial institute where it was borrowed from makes their money for the loan they provided. There are two different types of debt financing short-term and long-term. Short term financing is mainly use by a company to pay employees, purchase inventory or supplies which allow the organization operate its daily operations. Short term is usually paid back to the lender within a year’s time. There is also long term debt financing...
Words: 688 - Pages: 3
...about the different types of funds and their classifications by going to the Bloomberg’s FUND screen: FUND <Enter>; click “Fund Functions” and “Fund Lookup”; or enter MFOD and click type: Equity, Debt, Money Market, Real Estate, Commodity, or Alternative. 2. The performances of funds by type (e.g., mutual, hedge fund, ETFs, and unit investment trust) can be found on the Fund Heat Map Screen, FMAP. Use the screen to identify the top performers based on total return for several types: FMAP <Enter>, Click “Fund Type” in “View By” dropdown. 3.) alternative) can be found on Bloomberg’s Fund Heat Map Screen, FMAP. Use the screen to identify the top performers based on total return for several objectives: FMAP <Enter>, Click “Objective” in “View By” dropdown. 4. Use the Bloomberg fund search screen, FSRC, to search for the following types of equity-type funds and ETFs: a. Fund Type: Open-End; Classification (Asset Class Focus): Equity; Fund Strategy: Growth or Growth and Income; Analytic criterion: Input total return for one year of greater than X% (e.g., 20%) b. Fund Type: Closed-End; Classification (Asset Class Focus): Equity; Country of Domicile: select (e.g., U.S.); Analytic criterion: input total return for one year of greater than X% (e.g., 20%) c. Fund Type: Open-end; Classification: Industry Focus: Select industry (e.g., technology); Analytic criterion: input total return for one year of greater than X% (e.g., 20%) d. Fund Type: Open-end; Classification...
Words: 793 - Pages: 4
...research and development that it needs in order to remain competitive. Or, poor liquidity financials can mean that the company will have to cut corners on infrastructure maintenance, or reduce advertising and promotion expenses (thereby cutting into future sales). How is liquidity influenced by debt? Liquidity is important for both individuals and companies. While a person may be rich in terms of total value of assets owned, that person may also end up in trouble if he or she is unable to convert those assets into cash. The same holds true for companies. Without cash coming in the door, they can quickly get into trouble with their creditors. High liquidity means a company has plenty of cash and cash-like assets to pay off its debts. Low liquidity means a company is short on cash and may be unable to pay its debts. How do different types of debt affect liquidity? Liquidity is a measure of a company's ability to pay off its short-term debts like taxes, wages and payments to suppliers. Different types of debt affect liquidity by if you can quickly get cash from different types of debts without losing its value, the debts increases your liquidity. If it takes a long time to sell your debts, it does...
Words: 516 - Pages: 3
...how important it is to recognize that each business structure has its risks and how important it is as a business owner to comprehend these in order to protect oneself from losing any personal assets. Prior to reading the article, I believed that a Limited Liability Corporation was a type of structure that prevented the loss of personal assets in bankruptcy. However, after reading the article and being informed about Mr. Tardiff and Ms. Watson-Tardiff’s case, I learned the most about limited liability corporations because it went against my original understanding of this type of business structure. I did not realize that, despite a business being an LLC, banks require the guarantee of a personal asset like a car or home in order for a business owner to get money to run or start their business. I believed a loan under the name of the business did not require such a guarantee from the business owner. However, by learning that personal assets are often tied to loans taken out by a business owner in an LLC, I was taught that personal assets can be lost in this type of business structure. 2. How does a firm's bankruptcy affect the owner of a sole proprietorship? A sole proprietorship is a type of business structure that is unincorporated. This means that a single individual owns the...
Words: 964 - Pages: 4
...Bankruptcy can be filed when a company or a land owner is unable to pay overwhelming debts. Sometimes people hide their money and assets, and file bankruptcy just so they won’t have to pay back the debts that they owe even though that person is fully capable of doing so, which is illegal. This is called bankruptcy fraud, which is federal white collar crime which can lead to a maximum of 5 years in jail, and a $250,000 fine. People that you would most commonly see commit this fraud are private citizens, small business owners, corporate CEOs, real estate agents, politicians, and loan officers. There are four very common types of bankruptcy fraud, which are the concealment of assets, filing multiple times, giving false statements, and bust outs. Bankruptcy can be a hard thing to do for someone. Almost anyone filing for bankruptcy is truthful, has good intentions and is hard working. Sometimes, no matter how hard you try, the job market, the loss of your job or the high interest rates can be too much for someone to meet. There are two types of bankruptcy that someone can have, which are straight bankruptcy, and reorganization. When dealing with straight bankruptcy, someone isn’t able to pay their debts, like car loans, credit card debts, or mortgage. This usually involves homeowners, which allows them to start with a clean slate. With reorganization, that person is still able to pay off some debts, but not as fast as creditors would like you to. This gives you a repayment plan, and...
Words: 471 - Pages: 2
...guidance and keen supervision at every stage of my research paper inspired me in pursuing and completing it successfully and within schedule. I also heartily thank the Head of the Department Prof. RC Agrawal and the Respected Dean for the continuous help and encouragement and the friendly atmosphere of education provided by them. Kritika Goel ABSTRACT The paper is divided into two major segments- Introduction and Review of Literature. Former, gives a foundation of capital structure decisions with its purpose, significance and methodology. Later, provide the development of the present research by examining the earlier literature or secondary data on the same. Capital Structure is a basically a structure or mixture of different types of funding employed by an organization to get the necessary resources for its performance, growth and efficiency. This paper is enriched with the thorough study of capital structure choices and analyses the decisions that a firm(s) makes in its initial year of operation or in the middle if it desire for expansion, to acquire the data mine by getting the sink of future results of their firm. The...
Words: 3466 - Pages: 14
...Restructuring Debt Data ACC 545 July 18, 2011 Restructuring Debt Data Understanding the reporting and disclosure requirements for the different types of debt regarding debt restructuring is imperative. The manager of this company has requested an explanation of the above regarding bonds payable, notes payable, and capital leases. This paper should satisfy any questions about these topics. Long-Term Liabilities Included are several types of long-term liabilities; bonds payable, notes payable, and capital leases. Each of these types of debts have some similarities and some differences regarding the reporting and disclosure requirements, so to better understand those requirements and ensure proper application of requirements, an explanation is given. Loan covenants or restrictions usually come with long-term debt to protect both lenders and borrowers (Kieso, Weygandt, and Warfield, 2007). The information included in the loan covenant is the amount authorized to be issued, interest rate, due dates, call provisions, property pledged as security, sinking fund requirements, working capital, or any other restrictions. All of this information should be included in the body of the financial statements or the notes for a complete understanding of the financial position of the company (Kieso, et al., 2007). Bonds Payable Companies should report long-term bond liabilities at their amortized value. If a bond issues at a premium, the total bond liability reported at the end of...
Words: 965 - Pages: 4
