Corporate Finance: Shares, Debentures, and Capital Sources

Definition of a Share: A share is considered the smallest individual unit into which the total share capital of a company is divided.

Residual Claimants: Equity shareholders are the residual claimants of the company. This means they have a claim against the income or assets of the company only after all other prior claims, such as those of creditors and preference shareholders, have been satisfied.
Management Participation: It is the equity shareholders who have the right to participate in the management of their company, typically through voting rights and the election of the Board of Directors.
Bonus Shares: These are shares issued by the company free of cost to its existing equity shareholders. They are usually issued out of the company's accumulated profits or reserves.
Right Shares: These are shares offered to existing shareholders, giving them the first opportunity to buy new shares before they are offered to the public (referenced as a choice in the source material).

Fixed Dividends: Unlike equity shares which receive fluctuating dividends based on profit, the holder of a preference share has a right to receive a fixed rate of dividend.
Cumulative Preference Shares: For these shares, any dividend that is not paid in a particular year (due to insufficient profits) accumulates and must be paid out in future years before any dividend is paid to equity shareholders.
Convertible Preference Shares: The holders of these shares possess the right to convert their preference shares into equity shares after a certain period or under specified conditions.
Redeemable Preference Shares: These shares are issued with the provision that the company will repay the share capital to the holders after a specific period (referenced as a choice in the source material).

Status of Holders: Debenture holders are legally classified as creditors of the company. They provide loan capital to the business rather than ownership capital.
Returns on Debentures: Debenture holders receive a fixed rate of interest as a return on their investment. This interest is an obligation that must be paid regardless of whether the company makes a profit.
Convertible Debentures: These are specific types of debentures that are converted into equity shares after a specific, predetermined period.

Bondholders as Creditors: Similar to debenture holders, the holder of a bond is a creditor of the company.
Interest on Borrowed Capital: Interest is the specific term for the payment made by a company for using borrowed capital, such as loans, bonds, or debentures.
Regulation of Public Deposits: A company can accept deposits from the public for varying durations; however, the minimum period for which these deposits can be accepted is $6$ months.

Internal Financing: Retained earnings are categorized as an internal source of financing. This involves reinvesting the company's own profits back into the business rather than distributing them as dividends or seeking outside capital.
Raising International Capital: Depository Receipts (such as GDRs or ADRs) provide companies with the benefit and ability to raise capital in international markets, extending their reach beyond national or local boundaries.