The capital market generally consists of the following long term period i.e., more than one year period, financial instruments.
In the equity segment Equity shares, preference shares, convertible preference shares non-convertible preference shares etc and in the debt segment debentures, zero coupon bonds, deep discount bonds etc.
Equity Shares:
- In accounting and finance Equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists.
Shareholder' Equity:
- When the owners are shareholders the interest can be called shareholders equity.
- The accounting remains the same and it is ownership equity spread out among shareholders. In case all the shareholders are in one, the share equally in ownership equity from all perspectives.
Equity in Real Estate:
- The conception of equity with respect to real estate makes the equity of redemption.
- And, this type of equity is a property right valued at the difference between the market price of the property and the amount of any mortgage (loan) or other encumbrance.
Debentures:
- A debenture is a document, it is either creates a debt or acknowledgement it.
- It is a debt without collateral.(Property or asset).
- Coming to corporate finance, this term is used for a medium to long term debt instrument used by large companies to borrow money. (But in some countries this term is used as interchangeably with bond, loan stock.)
- It is like a certificate of loan/bond evidencing that the company is liable to pay a specified amount with interest. And the money raised by the debentures becomes part of the company's capital structure and it does not become share capital.
- Debentures holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meeting/votes. For example, on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's financial statements.
Zero Coupon Bonds:
- This type of bonds also called as a Discount Bond or Deep Discount bond, this bond bought at price lower than the its face value.
- This face value is repaid at the time of maturity and it does not make interest payments (periodically)
- Face value or Par value is the amount paid to bondholder at the time of maturity date)
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