What is Senior Debt? Senior Debt, or a Senior Note, is money owed by a company that has first claims on the company’s cash flows. It is more secure than any other debt, such as subordinated debt (also known as junior debt), because senior debt is usually collateralized by assets. It means the lender is…
What is a Senior Term Debt? Senior term debt is a loan with a priority repayment status in case of bankruptcy, and typically carries lower interest rates and lower risk. The term can be for several months or years, and the debt may carry a fixed or variable interest rate. To reduce repayment risk, fixed…
What is a Mezzanine Fund? A mezzanine fund is a pool of capital that invests in mezzanine finance for acquisitions, growth, recapitalization, or management/leveraged buyouts. In the capital structure of a company, mezzanine finance is a hybrid between equity and debt. Mezzanine financing most commonly takes the form of preferred stock or subordinated and unsecured…
What are Stock Warrants? Stock warrants are options issued by a company that trades on an exchange and give investors the right (but not obligation) to purchase company stock at a specific price within a specified time period. When an investor exercises a warrant, they purchase the stock, and the proceeds are a source of…
What is EBIT? EBIT stands for Earnings Before Interest and Taxes and is one of the last subtotals in the income statement before net income. EBIT is also sometimes referred to as operating income and is called this because it’s found by deducting all operating expenses (production and non-production costs) from sales revenue. Dividing EBIT by sales…
What is Corporate Finance? Corporate finance deals with a corporation’s capital structure, including its funding and the actions management takes to increase the company’s value. Corporate finance also includes the tools and analyses used to prioritize and allocate financial resources. The ultimate purpose of corporate finance is to maximize a business’s value by planning and allocating resources…
What is the Significance of Investor Influence? The level of investor influence a company holds in an investment transaction determines the method of accounting for said private investment. The accounting for the investment varies with the level of control the investor possesses. What are the Varying Levels of Control? An investor can hold majority ownership or…
What is an Investment? A financial investment is any asset or instrument purchased with the intention of selling said asset for a price higher than the purchase price at some future point in time (capital gains), or with the hope that the asset will directly bring in income (such as rental income or dividends). This…
What is Distressed Debt? Distressed debt refers to the securities of a government or company that has either defaulted, is under bankruptcy protection, or is in financial distress and moving toward the aforementioned situations in the near future. It includes all credit instruments that are trading at a significant discount and have a spread substantially…
