Bond is a long term source of financing that can be recommended to Top Glove Sdn.Bhd, where it is a debt instrument that able to raise capital. In short is can be said as a loan that exist between the issuers and investor. It is also know to be a fixed-income security. There will be an essential agreement of loan between issuer of bond and the investors, whereby the issuer of bond is required to pay an amount of fund as specified at a date specified. Moreover when bond attains maturity, the issuer of bond will repays the principal amount to the investor. Usually the investors will need to be paid with a constant interest payments from the issuer until the maturity of bond. As Top Glove have higher financial strength they might offer a better …show more content…
First of all, by issuing bond top glove able to diversify their funding sources, where there are uncertainties in the borrowings from banks. Secondly, bonds are able to match with the assets and liabilities of the company as they will have the flexibility to set the terms and conditions for the bond. Even though, issuance of bond incur the cost of credit rating, documentations and also for legal advice, still it is a best and less cost way to raise the financing. Lastly, the funds raised through bonds can be diversified to funds various projects. In the case of Top Glove, they may be able to finance their additional funds to diversification of production of condom. According to the Star online, They have mentioned that bonds are becoming as the major source of financing.(Appendix …show more content…
One of it is there will be no legal obligation for dividend payment. As preference share become as the part of net worth and thus have lessen debt to equity ratio, which improves the capacity of companies in borrowing. Then, there will be no weakening in control because it the voting rights are not joined to the issuance and they do not get any control over the rights with them. No Legal commitment for the payment of dividend which means the non payment of dividend will not lead a bankruptcy. Top glove will not give any collateral security as there is no such a requirement unlike the term loan which will require to give a collateral. Merely the company able to get the needed funds and the companies asset will be set free without any charges over them.
In summary, I would like to recommend top glove, bond and preference share as their source of capital. By examining, top glove is a profitable company but they could adopt this two financing method that will increase their companies performance more and will be able to eliminate risk associated to them as stated
Based on the optimal capital structure analysis, they should pursue as 70% debt proportion, which will give them the lowest cost of capital at 11.58%. Currently Star has no debt in their capital structure, so these new projects should begin to add debt to the company. However, no matter what debt and equity proportions are chosen for each project, the discount rate of 11.58% should be used, as the capital budgeting decisions should be independ...
However, financial situation of the firm plays a very important role in the decision of the bondholder and this company has been one of the most profitable companies America in terms of ROE, ROA ad gross profit margin. Apart from decrease in earnings and cash flow in 1997, UST had continuous increases in sales (10-year compound annual growth rate of 9%), earnings (11%) and cash flow (12%). They are generating their cash flows out of the operations. Thanks to their premium pricing, they are achieving more than average gross profit margin. So, over the years UST's revenues are stable and positive, and generally its statements are positive. The company does not have any problems with its cash flow.
We defined several criteria to determine our choice – return, risks and other quantitative and qualitative factors. Targeting a debt ratio of 40% will maximize the firm’s value. A higher earning’s per share and dividends per share will lead to a higher stock price in the future. Due to leveraging, return on equity is higher because debt is the major source of financing capital expenditures. To maintain the 40% debt ratio, no equity issues will be declared until 1985. DuPont will be financing the needed funds by debt. For 1986 onwards, minimum equity funds will be issued. It will be timed to take advantage of favorable market condition. The rest of the financing required will be acquired by issuing debt.
There is no universal theory of the debt-equity choice, and no reason to expect one. In this essay I will critically assess the Pecking Order Theory of capital structure with reference and comparison of publicly listed companies. The pecking order theory says that the firm will borrow, rather than issuing equity, when internal cash flow is not sufficient to fund capital expenditures. This theory explains why firms prefer internal rather than external financing which is due to adverse selection, asymmetry of information, and agency costs (Frank & Goyal, 2003). The trade-off theory comes from the pecking order theory it is an unintentional outcome of companies following the pecking-order theory. This explains that firms strive to achieve an optimal capital structure by using a mixture debt and equity known to act as an advantage leverage. Modigliani and Miller (1958) showed that the decisions firms make when choosing between debt and equity financing has no material effects on the value of the firm or on the cost or availability of capital. They assumed perfect and frictionless capital markets, in which financial innovation would quickly extinguish any deviation from their predicted equilibrium.
What is a bond? Bonds are often considered by investors to be “financial IOU's.” Frequently, bonds are issued from banks designed for quick, upfront cash used in lending purposes, such as loans. When purchasing a bond, the buyer pays an upfront sum of money to the seller. By the terms and conditions...
Assessing the capital structure of any firm is important for investors attempting to determine if...
Organizations that decide to issue bonds generally go through a series of steps. Discuss the six steps.
...rs, setting a good trend for the corporation. They also have a very low debt-to-equity ratio, indicating that they have enough equity to easily pay off any funds acquired from creditors. As a creditor I would feel safe in lending them funds for any future projects or endeavors.
The company is heavy on assets, the debt ratio will only grow to 0.40. with the added $50M in debt. Also, the firm will benefit from an added $2M in a tax shield and be able to return $12.7M a year to its. stockholders and investors, instead of $8.9M if equity is raised. finance the acquisition of the company.
In our business world, ‘Capital is the lifeblood of every business venture’ (Smith, 2012). Capital can build up company, purchases non – current assets for instance machinery or plant and paid off daily expenses for examples wages, lighting, power etc. Every company needs to have someone to manage the finance by thinking different types finance which are internal short term, internal long term, external short term and external long term financial resources. These are the main four ways which can raise the capital but those sources may relate to different repayment rate and length and the amount will be received. When the owner and manager thinking to apply internal or external financial resources they need to consider Purpose, Amount, Repayment, Interest and Security which is name as PARIS. Purpose is identifying what type of finance are suitable to required, amount is how much should be borrow, repayment is how much and when should the business pay the finance back. Interest is how much is the finance cost and security is the business need put down the business assets or personal household as a deposit before receive any finance. These are the main concepts owner and manager need to remember before apply any type of finance. (Cox and Fardon, 2009) Director and manager need to think effectively for rising capital in an effective way which includes lower repayment and the control of the company. (Gillespie, 2001)
...of violation of fundamental rights the defense of sovereign immunity cannot be accepted. Therefore, the view as to liability of the state changed in both ways that
A key benefit of equity financing is that the company will not be debt repayments. This is beneficial...
Many organizations have maximized the use of cash on hand by effective cash management techniques and the use of short-term financing. This paper will discuss various cash management techniques and short-term financing methods used by organizations.
Short term and long capital are needed for organizations to survive in today's economy. Organization's now more that ever need these different sources to diversify, expand or to keep processes more efficient thus keeping them at the head of the pack. Today's businesses and consumers demand for speed and quality of products.
Sources of finance are the different methods for a business to earn and obtain money. There are lots of ways to obtain money but two large basic sources of finance, which are the “owner’s capital” and “capital borrowed”. They are also called internal sources of finance and external sources of finance. In those sources, they are mainly divided in two groups, which are short-term sources of finance and long-term sources of finance.