BSNS114 Revision Notes for study guide exams

BSNS114 Revision Notes for study guide
exams
Preference shares Preference shares represent ownership in a company
and entitle the owner to a dividend, which must be paid before dividends are
paid to ordinary shareholders.
Owners of standard preference shares do not have voting rights and do not
participate in company's profits' beyond the fixed dividends they receive.


Ordinary shares Ordinary shares represent the basic ownership claim in a
company.
Owners of ordinary shares are not guaranteed any dividend payments and
have lowest priority claim on the company's assets in the event of insolvency.
One of the important rights of the owners is to vote on all important matters
that affect the life of the company.


What is the NPV decision criteria? Accept projects if NPV is > $0


What is the IRR decision criteria? Accept project is IRR > cost of capital


What is the payback period decision criteria? Accept projects with the
shortest payback period or earlier than a predetermined timeframe


What does NPV account for? Time value of money


Risk of the cash flows


Information on value creation