Introduction In financial transitions, flotation cost plays a vital role to stabilize the business. Mostly a firm raises capital via debt bonds or loans. In a process of raising capital, a company incurs the capital. The investment bankers charge a fee. The amount of fee varies according to the type and size of the offering. …
Flotation Cost: Meaning, Example, And Why is Relevant for the Firms? Read More »
Introduction The financial relationship between buyer and seller is developed on the foundation of trust. To build a long term business interconnection payment guarantee is essential. To make sure the payment transaction smoothly works between parties’ letter of financial credit plays an integral role. Definition In international trading, the banks provide a guaranteeing letter that …
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Meaning of Bonds Bonds are financial instruments used to raise debts from the open market. One of the most common types of bonds is plain vanilla bonds. These are the most basic bonds. Going by the name, if 100 customers go to the ice cream store, most of them would order vanilla-flavored ice cream. Further, …
Plain Vanilla Bonds: Meaning, Example, Features, And Advantages Read More »
Meaning of Hypothecation Hypothecation is a form of the charge against a specific asset. It occurs when the asset is provided as collateral in order to obtain a loan without giving the title rights, possession, or any other income generated by the asset. But, in case of default or non-compliance with terms and conditions, the …
4 Advantages and 5 Disadvantages of Hypothecation Read More »
The term ‘coupon’ is derived from the use of actual coupons for periodic interest payment collections. The coupon rate is yield paid by fixed-income security. The coupon rate is also called coupon payment. It is the yield the bond paid on its issue date. The yield changes when the value of the bond changes. Such …
What Is a Coupon Rate? And How Does It Affects the Price of a Bond? Read More »
Meaning Leveraged finance depicts the financing of highly levered and speculative-grade companies. The lower the ratings of companies, the more leveraged the instrument becomes. Leveraged finance typically works with corporations and private equity to raise debt by syndicating loans. It is also entrusted with the responsibilities of underwriting bond offerings which are to be used …
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Meaning A floating interest rate is a flexible interest rate that fluctuates as per the direction of the market or index. It is also popularly called a variable interest rate as it varies over the duration of the debt obligation. This differs from the fixed interest rates, where the interest rate of debt obligation would …
Floating Interest Rate – What It Is And When You Should Choose It Read More »
Meaning of senior debt Senior debt is the first-tier debt or liabilities of the company. It is a secure debit and is secured by a lien against the collateral property. The company provides regular principal and interest payments to lenders based on a preset schedule. Senior debt is generally funded by banks. The banks take …
What is Senior Debt? Features, Importance, Advantages, And More Read More »
Securitization is a financial process that converts the asset provided into security and makes them a tradeable financial asset. The assets that provide the basis for securitization are generally trading receivables, basically, debt owed to the company by its debtors and customers. Trade receivables comprise capital and periodic interest. Assets used for securitization include loans …
Mezzanine Fund (Mezzanine loan) does not belong to the class of pure debt or pure equity. In other words, it is at the same time a very high risk as well as a high reward instrument that fills the gap between senior debt and equity. An organization needs such type of funding to raise money …
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