Borrowed capital refers to funds obtained by a firm through loans or other forms of debt to finance its operations or investments. Compared to equity financing, borrowed capital involves a fixed cost in terms of interest payments.
The Borrowing Power of Securities refers to the ability of a client to borrow funds from a financial institution, using the purchased securities as collateral for the loan.
Debt financing is the process of raising capital through borrowing, typically via the issuance of bonds. It contrasts with equity financing, where capital is raised through the sale of ownership stakes in the company (stock).
An Equipment Trust Certificate (ETC) is a debt instrument that allows transportation companies to finance the acquisition of equipment such as aircraft, ships, and railroad cars. These instruments are backed by the equipment itself, providing security for the lender and financing terms favorable to the borrower.
Financial leverage refers to the use of debt in a firm's capital structure to amplify the returns on equity. It is an essential concept in corporate finance that can significantly impact a company's earnings and risk profile.
Income gearing refers to the relationship between a company’s operating income and its financial obligations, particularly interest expenses on incurred debt. Essentially, it measures the extent to which a company's activities are funded by borrowed money.
The overall cost of raising additional finance, reflecting the increased risks and required returns for equity and debt funders due to increased financing.
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.
Nonrecourse debt is a type of debt secured by collateral, typically real estate, where the lender's recourse in case of default is limited to the collateral, and the borrower has no personal liability beyond the collateral.
A Note Issuance Facility (NIF) is a type of credit arrangement that allows for the issuance of short- to medium-term notes in the Eurocurrency market. It provides borrowers with the ability to secure short-term debt funding on a continuous or revolving basis.
Private equity firms are investment firms that acquire controlling stakes in companies, typically using leverage, to restructure and eventually sell them for profit.
Recapitalization involves altering the mix of debt and equity financing in a company without changing the total amount of capital.
Revenue bonds are municipal bonds where the repayment of the principal and interest is secured by the revenue generated from the specific project they finance, such as toll bridges or utilities.
Social lending, also known as peer-to-peer (P2P) lending, is a method of debt financing that enables individuals to borrow and lend money without the use of an official financial institution as an intermediary.
Thin capitalization refers to an arrangement where a company is financed through a high level of debt compared to equity, typically involving intercompany loans within a multinational entity. This is often structured to gain tax advantages by exploiting interest payment deductions.
A trust certificate is a financial instrument issued to finance the purchase of railroad equipment. Under this arrangement, trustees hold the title to the equipment as security for the loan until the debt is fully repaid.
The weighted average cost of capital (WACC) represents a firm's average cost of capital from all sources, including both equity and debt, weighted by their respective usage in the firm's capital structure.
