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Dell

1/ ORDINARY SHARES
Ordinary shares also known as equity shares
Rights in the profit of the company
Can obtain dividend from the company
ADV
Divide into 2 point of view, the company and the shareholder
Have the right to vote
Ability to elect to board of directors
Can buy as many new stock as possible
For the company: no need to pay dividend
Shareholder can get high return if the company is profitable
For public limited company, easy to sell
DISADV
No guaranteed dividend
Monopoly of the decision in general meetings.
If company fails, share holders cannot be call upon to contribute finance.
For the company: decision might take long time
It they issue new shares, if you go to general public, the company will be taken the rights by the shareholders
If you increase the shares, the shareholder
Dividend are not tax deductible
2/ PREFERENCE SHARES:
Types of preference share: cumulative and non cumulative
Advantage: Fixed rate
Before paid out to ordinary shareholder
Regular income
High rate of return
No impact of borrowing power
Disadvantages Higher return = high risk
No benefit from extraordinary good performance from company
No voting right
Dividend not tax deductible
High cost of capital
3/ Debenture
Long-term loan borrowed by company through issue of debenture certificate
Types of debenture:
Irredeemable securities (not repayable)
Naked debenture (not secured)
Advantages:
Repayable over the long period (the company has money for long time)
Debenture are redeemable
Debenture are secured against the assets of the company
Disadvantages:
Fixed rate of interest must be paid on the due date
Only director of the company have right declare dividend
Tax deductible
4/ Convertible debenture:...