Question

Which Provide Funds for Companies when initiated?

Bond Issuance

Secondary offerings

Bank Credit Line

Warrants

Converting a convertible bond

follow-on offerings

Answer 1

Answer:

Bank Credit Line

Reason:

• A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer. Bond details include the end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments made by the borrower.
• A secondary offering is the sale of new or closely held shares by a company that has already made an initial public offering (IPO). There are two types of secondary offerings. A non-dilutive secondary offering is a sale of securities in which one or more major stockholders in a company sell all or a large portion of their holdings. The proceeds from this sale are paid to the stockholders that sell their shares. Meanwhile, a dilutive secondary offering involves creating new shares and offering them for public sale.
• A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is an arrangement between a financial institution—usually a bank—and a client that establishes the maximum loan amount the customer can borrow. The borrower can access funds from the line of credit at any time as long as they do not exceed the maximum amount (or credit limit) set in the agreement and meet any other requirements such as making timely minimum payments. It may be offered as a facility.
• Warrants are a derivative that give the right, but not the obligation, to buy or sell a security—most commonly an equity—at a certain price before expiration. The price at which the underlying security can be bought or sold is referred to as the exercise price or strike price. An American warrant can be exercised at any time on or before the expiration date, while European warrants can only be exercised on the expiration date. Warrants that give the right to buy a security are known as call warrants; those that give the right to sell a security are known as put warrants.
• A convertible bond is a fixed-income corporate debt security that yields interest payments, but can be converted into a predetermined number of common stock or equity shares. The conversion from the bond to stock can be done at certain times during the bond's life and is usually at the discretion of the bondholder. As a hybrid security, the price of a convertible bond is especially sensitive to changes in interest rates, the price of the underlying stock, and the issuer's credit rating.
• A follow-on offering (FPO) is an issuance of stock shares following a company's initial public offering (IPO). There are two types of follow-on offerings, diluted and non-diluted. A diluted follow-on offering results in the company issuing new shares, which causes the lowering of a company's earnings per share (EPS). During a non-diluted follow-on offering, shares coming into the market already existing and the EPS remains unchanged. Companies offering additional shares must register the FPO offering and provide a prospectus to regulators.