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Chapter 15

Sources of finance

Outcome

By the end of this session you should be able to:

 discuss the criteria which may be used by companies to choose between
sources of finance

 explain the relationship between risk and return

 explain the nature and features of different securities in relation to the risk/return
trade-off

 discuss increasing the efficiency of working capital management as a source of
finance

 discuss the advantages and disadvantages of lease finance as a source of
short-term finance

 suggest appropriate sources of short-term finance in a scenario question

 define and distinguish between equity finance and other types of share capital

 discuss the advantages and disadvantages of using retained earnings as a
source of finance

 explain the benefits of a placing for an unlisted company

 describe the features and methods of a stock exchange listing including a
placing and a public offer

 describe a rights issue and calculate the theoretical ex-rights price (TERP) of a
share

 demonstrate the impact of a rights issue on the wealth of a shareholder

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