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CAPITAL STRUCTURE
AMBARISH (15) | BIBHU (40) | MARY (86) | SURESH (155)
Group C Batch 18
CAPITAL STRUCTURE
A mix of a company's long-term debt, specific short-term debt, common
equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds.
Debt comes in the form of bond issues or long-term notes payable, while equity is
classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure.
SIGNIFICANCE:
o The most heart-breaking examples are when the company continues for several
years, often showing great promise, and then the structuring flaws, built in during the start-up phase, cause it to collapse genetic defects in the companys DNA.
o Many of the structural inadequacies in a company are also very difficult to fix after the
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company fails, then debts will give VCs their payment first
VCs usually invest in redeemable preferred stocks or debentures.
which it can be called, and the call premium (if any) are all defined in the prospectus at the time of issue and cannot be changed later.
As with regular preferred shares, dividends on callable preferred shares must be
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ADVANTAGE TO VC:
If the company succeeds
price.
Its a combination of debt and equity i.e.
they will get paid before the common stock holders i.e debentures
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sheet clean
Depends on strength of ones bargaining power
state to state. (NY do not permit issuance of preferred stocks at the holders option)
crafted carefully.
lenders will expect clear cut language placing the VCs claim to the companys assets.