ADMS2610-Session8-Ch17

ADMS2610-Session8-Ch17 - ADMS2610 Session 8 Chapter 17(pg...

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ADMS2610 Session 8 Chapter 17 (pg. 315-327) Corporate Securities - Share (the ownership of a fractional equity interest in a corporation o Used to raise capital for corporation o Can be fixed or par-value o Common or preferred o All corporations must have some voting common shares - Floating charge (a debt security issued by a corporation in which assets of the corporation, such as stock-in-trade, are pledged as security until such time as default occurs, the corporation is free to dispose of the assets o Not a share but a debt o Attaches to assets in general - Debenture (a debt security issued by a corporation that may or may not have specific assets of the corporation pledged as security for payment) o Priority rights determined by Bankruptcy Act and Personal Property Security Acts o If a bond defaults, the bondholders are entitled to the liquidated proceeds of the property or equipment that was bought with the money that was given to the bond issuer in exchange for the bond. Think of it like a mortgage – if you default on your mortgage, the bank can sell your house to recoup its money. o A debenture is just like a bond in all ways except for what is pledged as security for the investment. With a bond, the security is property. With a debenture, the security is only the “credit-worthiness” of the issuer. So if they have an AAA credit rating, they are in excellent financial shape. But if they default, or go under, the debenture holder has no property rights per se. o
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ADMS2610-Session8-Ch17 - ADMS2610 Session 8 Chapter 17(pg...

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