Types and sources of long-term funds - part 1

In this lesson

1. 0:00 Introduction to long term finance sources
2. 0:49 Ordinary shares explained
3. 2:01 Ordinary share rights and dividends
4. 3:52 Ways to issue ordinary shares
5. 5:33 Rights issue mechanics and calculations
6. 7:45 Preference shares characteristics
7. 10:02 Redeemable vs irredeemable preference shares

About this lesson

You'll explore ordinary shares and preference shares in detail — their characteristics, voting rights, dividend entitlements, and how they're valued — plus three ways companies can issue shares: at market price, through bonus issues, and via rights issues. This knowledge is essential for FM, AFM, and Strategic Business Leader papers, where you need to understand capital structure and financing decisions. The lesson covers ordinary shares first, explaining how they're issued with a par value, give shareholders voting rights and ownership stakes, and may pay variable dividends. You'll learn that ordinary shareholders rank last in liquidation, making them higher risk. The video then explores preference shares, which offer fixed dividends and preferential treatment in liquidation but no voting rights. A key distinction is whether preference shares are redeemable (classified as debt) or irredeemable (classified as equity), and whether they're cumulative (unpaid dividends roll forward) or non-cumulative. You'll also work through a practical example of a rights issue, learning how to calculate the theoretical ex-rights price (TERP) and understanding why rights issues temporarily depress share prices. This illustrates how companies balance raising cash with protecting existing shareholder value. The lesson sets the foundation for understanding how financing decisions affect company valuation and shareholder returns.

Duration: 12m