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BRILLIANT’S Long Term Financing and Valuation of Goodwill & Shares 173

have priority over common stock (ordinary VWm {S>{dS>|S²>g Ho$ ^wJVmZ ‘| ¶m {b{³dS>oeZ na H$m°‘Z
shares) in the payment of dividends and upon ñQ>m°H$ (gmYmaU eo¶g©) na dar¶Vm hmoVr h¡& {n«’$S>© ñQ>m°H$
liquidation. Terms of the preferred stock are de-
scribed in the articles of association. H$s eV] Egmo{gEeZ Ho$ Am{Q>©H$ëg ‘| dU©Z H$s J¶r h¢&
3. Warrant (Finance): In finance, a warrant 3. dma§Q> (’$m¶Z|g)… ’$m¶Z|g ‘| dma§Q> EH$ {g³¶mo[aQ>r
is a security that entitles the holder to buy the h¡ Omo hmoëS>a H$mo Omar H$aZo dmbr H§$nZr Ho$ {Z{X©ï> ñQ>m°H$
underlying stock of the issuing company at a H$mo EH$ {ZpíMV ‘yë¶ na IarXZo H$m A{YH$ma XoVm h¡& Bgo
fixed price called exercise price until the expiry E³gagmBO n«mBg H$hm OmVm h¡ O~ VH$ E³gnm¶ar S>oQ>
date. Zht AmVr h¡&
4. Capital note: Capital notes are several 4. H¡${nQ>b ZmoQ>… H¡${nQ>b ZmoQ>²g {g³¶mo[aQ>rO Ho$
types of securities. "Capital note" has a num- H$B© àH$ma h¢& ''H¡${nQ>b ZmoQ> Ho$ H$B© AW© hmoVo h¢ ³¶m|{H$
ber of meanings, as it can be an equity security,
¶h ¶m Vmo B{³dQ>r {g³¶mo[aQ>r, S>oãQ> {g³¶mo[aQ>r ¶m ñQ´>³MS>©
a debt security or a form of security used in ’$m¶Z|g ‘| Cn¶moJ {H$¶o OmZo dmbm {g³¶mo[aQ>r H$m EH$
structured finance. In all cases, the use of the
term "capital" is to denote that the security is àH$ma hmo gH$Vm h¡& g^r pñW{V¶m| ‘| ''H¡${nQ>b'' eãX H$m
relatively junior in the issuing corporation's Cn¶moJ àX{e©V H$aVm h¡ {H$ {g³¶mo[aQ>r BgH$s AgoQ²>g Ho$
order of priorities in claims for its assets. {bE Xmdm| ‘| Omar H$aZo dmbo H$m°nm}aoeZ H$s àmW{‘H$Vm Ho$
Am°S>©a ‘| VwbZmË‘H$ én go Oy{Z¶a hmoVo h¢&
5. Capital notes are a form of convertible 5. H¡${nQ>b ZmoQ²>g H§$d{Q>©~b {g³¶mo[aQ>r H$m EH$
security exercisable into shares. They are eq- àH$ma h¢ {OÝh| eo¶g© ‘| à¶moJ {H$¶m OmVm h¡& do B[³dQ>r
uity vehicles. Capital notes are similar to war- gmYZ h¢& H¡${nQ>b ZmoQ>²g dma§Q²>g Ho$ g‘mZ h¢ A§Va ¶h h¡
rants, except that they often do not have an {H$ CZ‘| A{YH$m§eV… E³gnm¶aoeZ S>oQ> Zht hmoVr h¡ ¶m
expiration date or an exercise price (hence, the EH$ E³gagmBO àmBg Zht hmoVr h¡ (AV… eo¶g© Ho$ ^{dî¶
entire consideration the company expects to Ho$ Bí¶y Ho$ {bE H§$nZr Omo nyam H§${gS>aoeZ àmßV H$aZo H$s
receive, for its future issue of shares, is paid Anojm H$aVr h¡ CgH$m ^wJVmZ {H$¶m OmVm h¡ O~ H¡${nQ>b
when the capital note is issued). ZmoQ> Omar {H$¶m OmVm h¡)&
6. Reverse convertible securities: A reverse 6. [adg© H§$d{Q>©~b {g³¶mo[aQ>rO… EH$ [adg© H§$d{Q>©~b
convertible security or convertible security is {g³¶mo[aQ>r ¶m H§$d{Q>©~b {g³¶mo[aQ>r EH$ {Z{X©ï> ñQ>m°H$ go
a short-term note linked to an underlying stock. Ow‹S>m em°Q>© Q>‘© ZmoQ> h¡& {g³¶mo[aQ>r EH$ CÀM Hy$nZ aoQ> Ho$
The security offers a steady stream of income ^wJVmZ Ho$ H$maU Am¶ H$m EH$ pñWa òmoV àXmZ H$aVm h¡&
due to the payment of a high coupon rate. In
addition, at maturity the owner will receive BgHo$ A{V[a³V, ‘¡À¶mo[aQ>r na Am°Za ¶m Vmo nma d¡ë¶y H$m
either 100% of the par value or, if the stock value 100% n«má H$aoJm ¶m ¶{X ñQ>m°H$ d¡ë¶y {JaVr h¡ Vmo {Z{X©ï>
falls, a predetermined number of shares of the ñQ>m°H$ Ho$ eo¶g© H$s nyd© {ZYm©[aV g§»¶m n«má H$aoJm&
underlying stock. In the context of structured ñQ´>³MS>© àmoS>³Q> Ho$ n[aàoú¶ ‘| EH$ [adg© H§$d{Q>©~b H$mo
product, a reverse convertible can be linked to EH$ B{³dQ>r B§S>o³g ¶m B§S>mBgog, Ho$ ~mñHo$Q> go Omo‹S>m Om
an equity index or a basket of indices. In such gH$Vm h¡& Eogr pñW{V ‘| ‘¡À¶mo[aQ>r na H¡${nQ>b [ano‘|Q>
case, the capital repayment at maturity is cash
settled, either 100% of principal, or less if the ZJX {X¶m OmVm h¡ ¶m Vmo {n«§{gnb H$m 100% ¶m H$‘ ¶{X
underlying index falls conditional on barrier {Z{X©ï> B§S>o³g ~¡[a¶a na geV© hmoVm h¡ Vmo ~¡[a¶a [ad{g©~b
is hit in the case of barrier reverse convertibles. H§$d{Q>©~ëg H$s pñW{V ‘| {hQ> h¡&