Raising finance

In this lesson

1. 0:00 Raising debt finance and its trade-offs
2. 1:14 Restrictive covenants and security requirements
3. 2:33 Equity finance through rights issues explained
4. 3:40 Why equity is more expensive than debt
5. 5:01 Calculating theoretical ex-right price
6. 9:03 Rights issue worked example: Bass Company
7. 11:06 Impact on shareholder wealth and holdings
8. 14:27 Key considerations before a rights issue
9. 15:58 Matching finance to business needs

About this lesson

You'll explore debt financing through banks and bonds, understand how restrictive covenants protect lenders, and discover why equity financing typically costs more due to investor risk. Most importantly, you'll master rights issues, a key method for raising equity from existing shareholders, and learn to calculate the theoretical ex-right price (TERP) to understand how share prices adjust after new shares are issued. This content is essential for FM, AFM, and SBL papers, where financing decisions directly impact strategic planning and financial performance. Through worked examples, you'll see how a shareholder's overall wealth remains protected even when share prices fall following a rights issue—a counterintuitive but crucial insight. You'll also consider practical factors like issue price, underwriters, and the impact on gearing and voting rights, equipping you to evaluate financing options confidently in both exam scenarios and real business decisions.

Duration: 17m