A bond is the financial security that issued by a business as an alternative of borrowing long-term funds (Financial Glossary 2011). When an entity like Guan Chong Berhad need to raise money to maintain ongoing operations or finance new projects, they can issue bonds to the investors rather than get the loans from a bank which have the higher interest rate that compare to issuing the bonds. Subordinated bond (or debt) is one of the type of the bonds that issued by a company. It is a debt issued by companies that ranks behind both secured debt and debentures security which refers to the ranking below others securities with regard in claiming on assets or earnings of company (Moorad 2004, p. 134). The company which issues subordinated bonds will not be paid out until all the senior debtholders are fully paid.
Interest Rate Swaps - International Financial Management Introduction Interest rate swaps are a financial instrument that firms use to hedge themselves against interest rate exposures by exchanging interest rate obligations with each other (Smith, 2011). Interest rate exposure is the risk that a firm can make financial losses when the interest rates on the firm’s liabilities/assets move unfavorably (upwards and downwards respectively) against it within the financial market. It also refers to the opportunity for gain when interest rates in the financial market drop on these very same liabilities. The rationale behind such a derivative instrument is that, both parties to the financial arrangement have their own distinct priorities and requirements
The preference dividend should be paid before ordinary dividend if distributable profits are available, the preference share capital will be repaid before ordinary share capital at the time of liquidation of the company. Normally the preference shareholders will not have the voting rights. 2. Retained Earnings “The percentage of net earnings not paid out as dividends for shareholders, but retained by the company to be reinvested in its core business activity, or to pay debt. It is recorded under shareholders' equity on the balance sheet”.
The result shows that institutional investors prefer dividend-paying firms to non-dividend paying firms. However, according to dividend-paying firms, institutional investors are more likely to hold low dividend-paying stocks. It should be noted, however, that stock repurchase had just been allowed before sample period. Subsequently, Lee et al. (2006) examine the relationship between dividend clientele and ownership structure in Taiwan stock market where the capital gain tax is zero and share repurchase is not allowed during the sample period.
In general, Trade-Off Theory is another approach on gearing. In addition, this theory recognizes that target debt ratio varies from different organisation (Peake and Neale, 2009). However, the application of the shield tax applies to companies that are safe, with tangible assets, taxable income to shield must to have a peak target ratio. Furthermore, that does not have wealth maximization, and are high in risk resort to equity financing. However when expense are involved there are deferments in the optimum and when no expense is involved the target debt ratio is applicable (Brealy, Myers, Allen, 2011).
This loan will be taken as an individual loan. During the repayment time, which is period two, the wealth is uncertain when this time come arrives. At this time, the debtor will consider his or her capabilities to repay the loan. If the debtors fail to repay the loans under all means, then they can consider filing for bankruptcy. After filing for bankruptcy, there is a wealth exemption X, which includes the states exemption for home equity and other commodities.
A carefully build capital structure will contributes to a good market value. If a firm carries too much debt which increases the leverage will influence investors to retract their money. This will make the market value of a firm to decrease. Each of the funds in capital structure has its own cost to the firm. It is because debt and equity are provided by investors or also known as owners and creditors thus, the fund provider has their expectation and demands on the firm’s profitability and growth for long term.
Unlike when the insured invests in the stock market, and if the insured leaves money in a savings account, it earns interest that is taxable by the tax department. But, with whole life insurance, the insured is able to, in some cases, take non-taxable loans from the policy and may look at the money earned on interest in the cash value accumulation portion as “non-taxable.” Plus, the benefit is also non-taxable when it is paid to your beneficiaries when the insured dies. Investment Value A whole life insurance policy is an investment whereby the insurance premiums are placed into stocks or bonds and earn interest over the life of the policy. The balance of the whole life insurance account can be borrowed against and counts as an asset in the insured’s overall financial profile. The real value of the policy investment may take time to build depending on the investment vehicle chosen and the amount of fees and commission the insured must pay off at the start of the policy.
1. No Insurance:- That means that despite the risk-reducing diversification benefits provided by mutual funds, losses can occur, and it is possible (although extremely unlikely) that you could even lose your entire investments. Mutual funds, although regulated by the government, are not insured at against the losses. The (FDIC) Federal Deposit Insurance Corporation only insures against certain the losses at the banks, the credit unions, loans, and savings, not mutual funds 2. Dilution:- Although diversification reduces the amount of risk involved in investing in a mutual fund, it can also be an disadvantage due to the dilutions.
Some of the endowment policies may also pay a share in the profits of the insurer which is called as bonus. Bonuses are an attraction of savings oriented insurance policies and are paid at regular intervals during the tenure of the policy or at the end of the policy term. Unit Linked Insurance Policies (ULIP) are a recent innovation where a part of the premium is used to cover life while the balance are invested in units of investment funds after deducting costs and expenses of the insurance. The investment options are given to the insured and the options include debt funds, large cap funds,