Briefly explain what is meant by a deep discounted rights issue, identifying the main reasons why...
Question:
Briefly explain what is meant by a deep discounted rights issue, identifying the main reasons why a company might raise finance by this method.
Rights Issue
A rights issue is when a company offers existing shareholders the opportunity to buy more shares in a company. It also brings in additional funds that the company can use to pay off debt, increase cash levels, or invest.
Answer and Explanation:
Become a Study.com member to unlock this answer! Create your account
View this answerA deep discounted rights issue is a rights issue sold below the company's market price.
The reason a company might choose equity financing over debt...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
What Is Equity Financing? - Definition, Pros, Cons & Examples
from
Chapter 6 / Lesson 10
14K
Learn about equity financing with its definition in monetary matters, along with its advantages and disadvantages. Discover the different types of equity in finance.
Related to this Question
- Explain the core principles of business finance. In particular, what is the goal of the business both long term and short term regarding major financial decisions?
- Why do most firms need funding? Provide a brief explanation of each reason.
- Describe the primary reasons a firm pursues increased diversification.
- What is meant by the term stretch objectives ? is it important that companies establish stretch objectives ? why or why not ?
- Investigate and explain three reasons why most new technopreneurship firms require funding.
- Explain, in depth, why dividends are important to PE firms but not to VC firms with examples.
- Explain what ''high leverage'' means for an individual.
- Define the full disclosure principle and explain why it is important to users of financial statements.
- Explain in detail why hedge funds are structured on flexibility? What does "structured" mean here?
- Explain, using details and examples, why a business should seek to balance its economic, legal and social obligations. In addition, mention how it benefits all of its stakeholders.
- What does it mean to raise price more than retail in finance?
- I will rate your answer up or down! Describe the importance synergy can play when a firm acquires another firm to the bottom line of the parent company. Give specific detailed examples how companies
- Describe what is meant by a general partnership and a limited partnership. Describe the major difference between the two.
- Explain in your own words why a business would benefit from a diverse workforce. Provides examples and research to defend your positions.
- Describe a benefit of developing a pro forma financial statement. Explain why this benefit would be helpful in a business.
- Describe what it means if a new company decides to issue its ordinary shares to investors in installments and why they might sell shares this way?
- Discuss the advantages and disadvantages of raising debt finance rather than equity finance.
- Describe customer equity and explain why it is important to a company.
- Describe the firm's goal, and explain why maximizing the firm's value is an appropriate goal for a business?
- Explain the equity theory of motivation. What are the four forms of equity?
- Explain equity financing for entrepreneurs.
- What factors must a firm consider when deciding to raise or lower its price? In answering this question think and use a real-world example that helps illustrate your answer.
- Are substantial differences found between the financial goals of investor-owned and not-for-profit corporations? Explain your answer.
- Describe two instruments used to source long term debt in the global market and discuss why a firm may decide to raise debt capital internationally.
- Briefly explain how a company creates value.
- Discuss the implications for a business if a substance approach is used for the reporting of convertible bonds. Explain what is meant by the term split accounting when applied to convertible bonds
- Introduce the main parameters that influence the cost of debt of a selected company. Discuss the potential causes and consequences of relatively high cost of debt. Argue whether it is preferable to have a rather high cost of debt. Explain how high cost of
- Describe the reasons a company would choose below-market or above-market compensation policy and the advantages and disadvantages of open versus secret pay policies.
- A. Define and explain the terms: price, price range, price ceiling, and price floor. \\ B. Why is it important to keep these terms distinct in the entrepreneur's thinking?
- Explain the term "quality of earnings" and discuss how management can influence earnings legally.
- a. Explain how a small business can use factoring to raise funds. b. Explain what are the advantages and dangers of this type of financing.
- Describe in a brief essay what say-on-pay policies and clawback policies are. Why do corporations implement these policies? What will be an ideal response?
- Explain what operating capital represents and why it is important for determining a company's intrinsic value.
- In a brief essay, discuss some of the reasons why companies choose to offer employee benefits. What will be an
- Give an example of how a public company has relied more on one method of financing than the others and why it has done so. Below are examples of types of financing methods: 1. Issuing bonds 2. Borro
- Explain the difference between cost of equity and cost of capital? For a geared entity, how would raising equity finance impact on the cost of equity?
- Is operating leverage similar to financial leverage? If a firm has high operating leverage would you expect it to have high or low financial leverage? Explain your reasoning.
- (a) Define financial frictions. (b) Explain why an increase in financial frictions is a key element in financial crisis.
- What are the pros and cons of your primary ethical principle, in terms of advancing up the corporate ladder? Discuss.
- What is the impact of an increase in leverage on the expected return of equity holders? Explain.
- Explain why financial statement analysis can or cannot be performed in a way that provides significant advantage to an investor.
- Briefly explain new-venture creation versus corporate renewal.
- Explain why would rising prices of emission rights increase the incentive for firms to use cleaner production methods thoroughly.
- Which of the following reasons help explain why companies tend to focus on short-term performance? a. The investment community's obsession with short-term performance b. Because they believe that it is more rational and constructive. c. Customers' obsessi
- Explain what free cash flow represents and why it is important for determining a company's intrinsic value.
- Explain the meaning of Big Data and discuss how its increased availability has led to new privacy concerns.
- A) Explain four reasons why some firms choose share repurchases over dividends to distribute their excess cash. B) How will share repurchase affect the financial leverage of firm? Is that likely to impress financial institution to lend to firm? Explain.
- Explain how e-business has created a news type of strategic alliance among companies. Why do investors expect a firm to act ethically and exhibit social responsibility? What are the Six elements tha
- 1. Briefly explain the reasoning or justification for the interpretation hierarchy of Negotiable Instruments? 2. What are the three values of continuing lines of credit for a creditor? 3. What are the three values of continuing lines of credit for a deb
- Explain the foundational values for identifying business ethics issues with examples.
- Explain why firms with low growth opportunities and a high proportion of tangible assets are likely to have more debt in their capital structure than firms with high growth opportunities and a high pr
- Explain various ways which entrepreneurs could use to finance a new venture (Debt finance and Equity Finance)?
- In the context of business management, briefly explain the following term: Floating exchange rate.
- In a short essay, explain the value of CSR for businesses.
- Provide four reasons why a private company valuation is necessary in equity investment.
- What disadvantages does finance law have for businesses?
- Explain carefully why firms with market power do not, in general, also maximize total revenue.
- How would you describe/explain the concept of a relevant market? What does a product-oriented definition and a benefit-oriented definition have to do with it? What are the aims of defining a relevant
- Identify and briefly describe the major securities that originated in or are traded in capital securities markets.
- What causes cost of equity to increase?
- What distinguishes a firm's short run period from its long run period? Briefly explain.
- A company's cost of capital is impacted by the company's financing choices. What are the advantages and disadvantages of using debt financing compared with equity financing?
- Explain the role of commercial banks as source of debt capital for small businesses. What types of financing are available from commercial banks? What will be an ideal response?
- a. What is financial leverage? b. How, and under what conditions, can financial leverage benefit a company? c. How, and under what condition, can it harm a company?
- Define consumerism and briefly discuss the various rights associated with it.
- The primary means for gaining and sustaining competitive advantages for most companies is shifting downstream. Explain and discuss this statement.
- Why is business ethics becoming increasingly important these days? Explain in brief.
- Why would a company want to increase its product mix breadth? Why would it want to decrease it?
- Why is quality important for business? Explain each benefit briefly.
- Explain the following statement: "Companies face a great deal of uncertainty in their strategic business environments."
- Explain three common ways to manipulate a company's earnings.
- Discuss why overpayment is problematic from an equity standpoint.
- Describe the requirements for a change in accounting principle and at least four reasons why companies might implement a change in accounting principle.
- Explain the different options a firm has to minimize losses in the short run.
- What are two reasons firms offer trade discounts?
- Summarise why a provision for doubtful debts is created, and include a brief summary of the three common methods for estimating the doubtful debt value.
- Explain downsizing and discuss the major reasons why organizations engage in it. Explain why downsizing strategies are or are not generally successful.
- Describe the various factors that may affect the overall cost of capital of a company and explain how each of the factors may affect the cost.
- Explain why dividends are important to private equity firms but not to venture capital firms.
- Discuss the term quality and explain how improving quality can lower costs and boost revenues.
- Describe the driving forces for corporate environmentalism and indicate which of these forces would you regard as the most important and why
- What are the defining distinctions between for-profit businesses and not-for-profit entities, including governments? What are the implications of these distinctions for financial reporting? Why are m
- List and briefly explain three issues that may arise in wage negotiation. Explain what the issues are composed of.
- Give four reasons why the factor prices may not be equalized across countries. For each one, give a brief explanation and/or illustration of why it may prevent the Factor Price Equalization Theorem from holding.
- Explain what is meant by the liquidity trap. Also discuss the implications of a liquidity trap for the shapes of the money demand and LM curves.
- List the four basic rights in the private enterprise system. Explain.
- What is meant by the term wage-effort bargain? In what ways might its control by employers lead to conflict at the workplace?
- Define peculiarities of financial institutions, and provide reasons why we need them.
- Explain what the incentives of bondholders and stockholders are. Will a firm with no debt act differently than a firm with a significant amount of debt?
- Explain why low switching costs and weakly differentiated products tend to give buyers a high degree of bargaining power.
- Briefly describe how exchange rates influence business activities.
- Describe differences in the incentive effects of royalty rate and fixed-fee contracts. What are the advantages and disadvantages of each of the contracts? Explain why one of them and not the other might be used in your organization. Describe the conseq
- Describe and discuss five reasons why bidding firms might still engage in acquisitions even if, on average, they do not create value for a bidding firm's stockholders.
- Why might it be rational for a small firm that does not have access to the capital markets to use the payback method rather than the NPV method? Explain.
- Explain the need for trade-offs in the implementation of business strategies.
- Why would limited partners countenance their G.P's putting more money into a struggling company? How does that differ from a bank's response to a company's difficulties? How does that help explain the differences between the sorts of companies that take V
- In business management, discuss the rationale behind revisiting the low-cost labor paradigm.
- Discuss how different forms of corporate giving contribute to building strong relationships between businesses and communities. Using the core value of excellence, discuss explain how corporate giving
Explore our homework questions and answers library
Browse
by subject