Flotation (Floatation) Cost refers to the expenses incurred by a company when it issues new stocks or bonds. These costs include underwriting fees, legal fees, registration fees, and other associated expenses.
Flotation costs refer to the expenses a company incurs when it issues new securities, including underwriting, legal, registration, and accounting fees. These costs are crucial for companies to consider when planning to raise capital through new stock or bond issues.
A partly paid share in a company that the shareholder must forfeit due to failure to pay a subsequent or final payment. Such shares must either be sold or canceled by a public company, whereas a private company is not regulated in this respect.
Funded debt refers to debt that is due after one year and is formalized by the issuing of bonds or long-term notes. It often involves a sinking fund to ensure the debt can be retired systematically.
Funding is the act or process of providing financial resources, typically in the form of money, to finance a program, project, or organization. Funding is critical across various sectors for initiating and sustaining operations and achieving objectives.
A funds flow statement provides a detailed analysis of the changes in a company's working capital during a specific period, detailing the sources and applications of funds.
Generally Accepted Accounting Principles (GAAP) are a common set of accounting principles, standards, and procedures that companies must follow when they compile their financial statements. GAAP’s objective is to ensure that financial reporting is transparent and consistent from one organization to another.
Going private refers to the movement of a company from public to private ownership, either by the company's repurchase of its shares or through purchases by an outside private investor.
A special reserve used for accounting purposes to handle the write-off of goodwill from the balance sheet. This reserve has a particular debit balance and serves as a tool for managing potential overvaluations in the goodwill asset.
Greenmail refers to the practice of purchasing a substantial block of a company’s shares and then selling them back to the company at a premium over the market price, often to prevent a hostile takeover bid. This contentious tactic is more prevalent in jurisdictions like the United States, where companies can more freely repurchase their shares.
Gross margin represents the percentage of total sales revenue that a company retains after incurring the direct costs associated with producing the goods and services it sells. It is a critical metric for assessing a company's financial health and operational efficiency.
A hostile takeover is an acquisition attempt by another company or raider against the wishes of the current management and board of directors.
Interim financial statements are financial reports covering a period of less than one full fiscal year, typically used by companies to provide updated information to stakeholders between annual reports.
Internal financing refers to funds generated from a company's normal operations, in contrast to external financing, which involves borrowings and new equity.
Investment appraisal, also known as capital budgeting, involves evaluating the financial viability of a potential investment or project. It assesses whether the investment will yield adequate returns to justify the initial outlay.
Investment banking encompasses a range of financial services focused on serving large corporations, public bodies, and investors, distinguishing itself from retail or commercial banking by not directly involving individual depositors.
Issued and outstanding shares are shares of a corporation that have been authorized in the corporate charter, issued, and are currently held by shareholders. These shares represent the capital invested by the firm's shareholders and owners.
A junior issue refers to a type of debt or equity that is subordinate in claim to another issue, particularly in terms of dividends, interest, principal, or security in the event of liquidation.
A junk bond is a high-yield, high-risk security typically issued by companies seeking to raise capital quickly. These bonds offer higher interest rates to compensate for the increased risk of default.
Techniques often used at the end of a financial year to enhance a cash position and reduce borrowing by arranging for the settlement of outstanding obligations to be accelerated (leading) or delayed (lagging).
An individual or firm that extends money to a borrower with the expectation of being repaid, usually with interest, creating debt in the form of loans. Lenders are paid off before stockholders in the event of corporate liquidation.
A formal letter written by a parent company to a lender, acknowledging its relationship with another group company and its awareness of a loan being made to that company. It is the weakest form of a letter of comfort.
An in-depth exploration of leveraged buyouts, including definitions, examples, related terms, frequently asked questions, and resources for further study.
A leveraged buyout (LBO) is a financial transaction where a company is acquired primarily using borrowed funds, with the target company's assets often used as collateral for the loans.
A leveraged company is a business that has debt in addition to equity in its capital structure. The term is often used to describe companies that are highly leveraged, typically industrial companies with more than one-third of their capitalization in the form of debt.
Limited recourse financing, also known as project financing, involves securing loans or investments based on the projected earnings and assets of the specific project rather than the borrower's overall assets.
Liquidity management refers to the combination of day-to-day operations carried out by the financial management of an organization with the objective of optimizing its liquidity so that it can make the best use of its liquid resources.
Loan capital refers to the funds borrowed by an organization to finance its operations, subject to the payment of interest over the life of the loan, which is repaid at the end of the loan term.
Long-term liabilities are financial obligations of a company that are due more than one year in the future. Examples include bonds payable, long-term loans, and lease obligations.
Mainstream Corporation Tax (MCT) was formerly a key component of the corporation tax system in the UK, calculating a company's tax liability for an accounting period after the offsetting of Advance Corporation Tax (ACT), which was abolished in 1999.
MBO is an abbreviation that can refer to either 'Management Buy-Out' or 'Management by Objectives.' The term's meaning depends on the context in which it is used, encompassing significant concepts in corporate finance and management techniques respectively.
MCT can refer to an individual recognized as a Member of the Association of Corporate Treasurers or it can stand for mainstream corporation tax, a standard rate of corporate tax applied to profits of companies.
The term 'merge' has dual meanings in both data management and corporate finance. In the context of data management, merging refers to combining multiple lists or files by consolidating duplicate records into single records. In corporate finance, merging refers to the financial consolidation of two companies where only one company survives as a legal entity.
Relief from adding to, or setting up, a share premium account when issuing shares at a premium if an issuing company has secured at least a 90% equity holding in another company.
Modeling refers to designing and manipulating a mathematical representation that simulates an economic system or corporate financial application to study and forecast the effects of changes.
An agreement between a bank and a company that provides the company with the ability to borrow up to a certain limit each day in the money markets, typically on a short-term basis, often overnight or up to one month.
Transfer prices set by negotiation between the supplying and receiving divisions of an organization, typically deemed appropriate when there is an imperfect market for the goods and services exchanged.
Net Dividend refers to the dividend paid by a company to its shareholders after excluding the tax credit received by the shareholders.
Net Working Capital (NWC) is a financial metric that represents the difference between a company's current assets and its current liabilities. It highlights a firm's short-term financial health and operational efficiency.
New money refers to the additional long-term financing provided to a company or government through new issues or issues exceeding the amount of a maturing issue or by issues that are being refunded.
Shares issued without any payment, typically as a result of a rights issue, often used by companies as a means to raise capital.
A type of preference share that does not entitle shareholders to receive omitted dividends from previous years.
A non-participating preference share refers to a type of preference share that does not entitle the shareholder to participate in the excess profits of a company beyond a predetermined fixed rate of dividend.
A Non-Revolving Bank Facility is a type of loan issued by a bank to a company that allows for specific drawdowns over a defined period. Once funds are drawn, they function like a term loan.
Corporate securities that do not empower a holder to vote on corporate resolutions or the election of directors. Commonly issued during takeovers to dilute equity and discourage mergers.
Denoting assets or liabilities that do not appear on the balance sheet of a company. Various off-balance-sheet arrangements have been entered into by companies wishing to avoid full disclosure of their assets and liabilities through complex legal agreements, joint ventures, specially created subsidiaries, and structured finance arrangements.
An invitation to the general public to purchase the stock of a company through an intermediary, such as an issuing house or merchant bank. It is one of the most frequently used means of corporate flotation.
An omitted dividend refers to a dividend that was scheduled to be declared by a corporation but was not voted for the time being by the board of directors. This situation often arises when a company faces financial difficulty and decides it is more important to conserve cash than to pay a dividend to shareholders.
Ordinary Shareholders' Equity, often called Ordinary Shareholders' Funds, represents the remaining value of a company's assets after all liabilities and obligations to other shareholders are met, making this the equity available for distribution to ordinary shareholders.
Outstanding capital stock refers to the total shares of a corporation that are currently held by all its shareholders, including retail investors, institutional investors, and company insiders. It is calculated by subtracting the number of treasury shares from the total issued shares.
Paid-In Capital Surplus represents capital received from investors in exchange for stock. It is distinguished from capital generated from earnings or donations and includes capital stock and contributions from stockholders that are credited to accounts other than capital stock, such as an excess over par value.
Paid-up share capital refers to the proportion of issued share capital of a company that has been fully paid for by its shareholders, meaning the company has received the full payment for the shares.
Detailed exploration of partial liquidation in corporate finance, including examples, FAQs, related terms, resources, and suggested books for further studies.
Participating Preference Shares are a type of preference share that not only provides a fixed dividend but also allows holders to participate in additional profits after certain conditions are met.
Any person who has an interest in the capital or income of a company, such as a shareholder, loan creditor, or any individual entitled to the distributions of the company.
A dividend customarily paid on common shares that the board of directors fails to declare, usually due to financial difficulties at the company; also referred to as an omitted dividend. It differs in implications when associated with cumulative preferred stocks, where the passed dividends accrue until paid.
An essential financial term representing the profits of a company that are subject to corporation tax, adjusted for allowable deductions.
An obligation recognized by the employer for the future liability to make annuity payments to employees. The reserve is typically a liability when it results from charging a pension expense. However, in a revocable plan, the reserve is considered an appropriation of retained earnings regardless of whether it affects specific assets.
Permanent financing refers to long-term financing options available in both corporate finance and real estate, ensuring sustained capital over extended periods through debt or equity instruments.
Permissible Capital Payment (PCP) relates to how much cash or other financial considerations a company is allowed to return to shareholders according to legal or regulatory standards, primarily through processes such as share buybacks or reductions in capital.
A payment made out of capital when a company is redeeming or purchasing its own shares after using all available distributable profits and the proceeds of any new issue of shares.
Plow back refers to the practice of reinvesting a company's earnings back into the business rather than distributing those profits as dividends to shareholders. Typically employed by smaller, fast-growing companies, plow back is a strategy aimed at fueling further growth and expansion.
The term 'pool' has various definitions across different industries including corporate finance, industry, insurance, investments, and real estate. It generally refers to a combination of resources or funds for a specific purpose.
Pooling of interests was an accounting method, previously utilized in mergers and acquisitions, allowing the combining of companies' balance sheets by line item additions of their assets and liabilities.
Preference shares, also known as preferred stock, are a class of ownership in a corporation that has a higher claim on assets and earnings than common stock.
Preliminary expenses are the initial costs incurred during the establishment of a company. These expenses often include costs such as issuing shares and can be written off to the share premium account.
Premium on capital stock refers to the excess amount received from stockholders over the par value of the stock issued. It is reflected in the balance sheet under the paid-in-capital section of stockholders' equity and should not be regarded as income.
Today's value of a future payment or stream of payments, discounted at an appropriate compound interest or discount rate; also known as the time value of money.
A private ledger is a subset of an accounting ledger that holds confidential and sensitive financial information, isolated from the general ledger for security and privacy reasons.
Profits available for distribution refer to the earnings or surplus that a company can allocate to its shareholders in the form of dividends or other forms of payouts.
Profits chargeable to corporation tax (PCTCT) represent the total taxable profits of a corporation on which corporation tax is calculated. This includes profits from trading, property, investment income, overseas income, and chargeable gains, after deducting any allowable charges.
Voluntary reorganization by the stockholders themselves of a corporation facing financial difficulties; the voluntary restructuring of a corporation's debt and capital structure.
A real option is an investment embedded within a project or a business activity that provides the firm with the flexibility to make decisions that can have significant financial implications.
Recontracting is the renegotiation of contracts between a company in financial distress and its creditors to establish more favorable terms.
A Register of Charges is a statutory document maintained to record details of charges created by a company on its assets to secure debt. It is crucial for maintaining transparency and protecting creditor rights.
A list detailing individuals or entities holding debentures in a UK company, managed in accordance with specific regulations and available for public and stakeholder inspection.
Registered capital, also referred to as authorized share capital, is the maximum amount of share capital that a company is authorized to issue to shareholders as stated in its corporate charter.
A payment made to an employee or another party to cover expenses or losses incurred. Common in corporate settings for expenses like travel and entertainment.
Reserve accounting refers to the allocation of funds to reserves rather than processing them through the profit and loss account. This method might be used in specific instances, such as making prior-period adjustments.
Retained earnings represent the portion of net income that a company retains, rather than distributing it to shareholders as dividends, to reinvest in its core business or to pay off debt.
Retained earnings refer to the portion of a company's profit that is held back and not distributed to shareholders as dividends. These earnings are reinvested in the business for growth, debt reduction, or other corporate purposes.
A statement that provides a reconciliation of the beginning and ending balances in the retained earnings account on a company's balance sheet.
An account used to indicate that a portion of retained earnings is not available for dividends but is earmarked for specific purposes.
A return of capital refers to a distribution from a corporation to its shareholders that is not paid out of the corporation's earnings and profits. It represents a return of the shareholders' investment in the stock of the company.
Return on Capital Employed (ROCE) is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed.
Return on Equity (ROE) is a financial metric that assesses a company's ability to generate profit from its shareholders' equity. It is calculated by dividing net income by shareholders' equity.
Return on Invested Capital (ROIC) is a profitability ratio that assesses how efficiently a company uses its total capital—including common and preferred equity as well as long-term funded debt—to generate profits.
RAFT, or Revolving Acceptance Facility by Tender, is a financial arrangement commonly used to manage and facilitate short-term financing needs of corporations. This instrument is widely adopted in the banking and corporate finance world due to its flexibility and efficiency.
A revolving bank facility, also known as standby revolving credit, is a flexible loan agreement between a bank or a group of banks and a company, which allows the company to draw and repay funds multiple times during the loan's term.
The concept of ring-fencing is used in finance and corporate restructuring to isolate a certain portion of assets, liabilities, or operations to protect the rest of the company or to dedicate specific funds for particular purposes.
A self-tender offer is a strategic financial maneuver used by companies to purchase a portion of their own stock from shareholders, often to thwart hostile takeover attempts.
Semiannual refers to an event or action occurring twice a year, often at six-month intervals. It is synonymous with the term 'biannual.'
Loans or debt securities that have priority claim over junior obligations and equity on a corporation's assets in the event of liquidation.
Share premium is the amount payable for shares in a company that is issued by the company itself, in excess of their nominal value. The premium received must be credited to a share premium account, which is restricted in use and cannot be utilized for paying dividends to shareholders.
A share premium account records the amount received by a company over and above the par value of its shares. Such balances are used for specific purposes under regulatory stipulations.
Shareholders' equity represents the owners' claim after subtracting total liabilities from total assets. It is a crucial metric for understanding a company’s financial health and includes components like share capital and reserves.
A limited reserve set aside systematically by an issuer over time to repay debt or to replace an asset in the future.
A potential target that has not yet been approached by an acquirer. Such a company usually has particularly attractive features, such as a large amount of cash or under-valued real estate or other assets.
A finite-life entity created by corporations for a specific, narrow purpose, such as issuing income-preferred securities. These entities are used for various financial and organizational purposes, and are also known as special-purpose vehicles (SPVs) or variable-interest entities (VIEs).
A detailed summary that outlines the changes in equity for a company over a financial period, reflecting the sources of funding and how funds have been utilized.
