Debt Financing

Syllabus

Thematic definition of lectures: 1. Content of debt financing. The definition of debt within the financial capital structure of a company, debt as an important tool for financing needs in a company, the importance and assessment of debt from the perspective of investors, company management, creditors and financial analysts. Current trends in debt financing. 2. Credit strategy of the enterprise and credit decision making. Management of lending to other businesses, characteristics of trade, supplier and contract lending. Limiting factors for non-cash lending. The impact of lending on the firm's own financial position. 3. Debt strategy and debt financing decision-making. Management decision-making on securing financial resources to finance the operational and investment needs of the enterprise. Positive effects and negative impacts of debt financing decisions. Impact on the financial and capital structure of the enterprise. 4. Analysis of the debt situation of the enterprise. Debt repayment capacity, debt limits of the enterprise and the link to cash flow, quantification of the cost of debt, internal and external factors affecting the cost of debt. 5. Financing options through bank loan products. Forms of short-term bank loans for financing temporary operating needs, characteristics and principles of financing through overdraft, revolving and pawn loans, principle and use of bills of exchange for financing, forms of long-term bank loans for financing investment needs, mortgage loans. 6. History and present of banks and the banking sector in the Slovak Republic and in the EU. The origins of banks and their historical development from the 19th century to the present day in the Slovak Republic. Negative consequences of the management of banks in the 1990s in Slovakia before and after the division of Czechoslovakia. Brief characteristics of the world's oldest banks. Characteristics of commercial banks in Slovakia today. 7. Regulation of banks within the euro area. Principles, objectives and role of the European Central Bank and its impact on the euro area, structure and decision-making bodies. Monetary policy management within the euro area. Characteristics of the European system for resolving financial difficulties of commercial banks in the euro area, single deposit protection scheme for commercial banks. 8. Banks and banking in the Slovak Republic. Principles of regulation of the banking sector and prudential rules for banks in Slovakia today. BASEL III. The role of the central bank, i.e. the National Bank of Slovakia, in the management of monetary policy. Assessing the stability of banks from the point of view of clients and financial performance. 9. Collateralization of loans. Collateralizing, preventive and reimbursement function of credit collateral instruments. Forms of hedging instruments as ancillary liabilities. Characteristics of bank guarantee, suretyship, promissory note, acknowledgement of debt, contractual penalty, pledge, objects and forms of pledges such as real estate, business shares and others, registration of pledge, notarial central register of pledges, lien and possibilities of its use. Register of loans and guarantees. 10. Alternative forms of debt financing. Characteristics of various forms of financing frequently used in practice, such as leasing, factoring and forfaiting. The subject of financing through operating and financial leasing and its advantages and disadvantages for financing the needs of the enterprise. Characteristics and use of factoring in the conditions of business activities and the provision of financing for the needs of the enterprise. Principle and characteristics of forfaiting. 11. Management of the enterprise in conditions of indebtedness. Causes of the existence of debt, reasons for the emergence of insolvency, warning signs of future problems of the indebted enterprise, characteristics of objective and subjective financial difficulties and ways of their elimination. Obligations of the debtor and recovery measures to improve the unfavorable financial situation of the enterprise. Options for restructuring the financial processes of the enterprise. 12. Legal aspects of credit and lending. Basic legal regulation of credit and credit processes. Content of the credit agreement, rights and obligations of the borrower and the creditor. Penalties and risks of non-compliance with credit agreements. Provisions of the basic legal norms related to credit and interest such as the Banking Act, the Civil Code and the Commercial Code. 13. Psychological and social aspects of debt financing and credit. Why we get into debt, why we default on loans and credit, types of honest and speculative borrowers and their psychological and social characteristics and attitudes. Thematic definition of exercises: 1. Information about the course requirements, distribution of topics of seminar papers, solving and practicing examples on the methods of interest calculus and interest on debt. 2. Presentation of students in ppt and discussion on the topic Status and development of credit and interest rates at home and abroad, comparison of development in Slovakia with selected countries, development of credit in non-financial enterprises by sector in Slovakia. Solving and practicing examples to quantify the need for financial resources. 3. Presentation of students in ppt and discussion on the topic Rules of banks for lending to non-financial enterprises in Slovakia. Solving and practicing examples on cost of debt and average cost of capital per enterprise. 4. Student presentation in ppt and discussion on the topic Use of short-term financing in the practice of Slovak enterprises. Solving and practicing examples on financing decisions for long-term investments. 5. Students' presentation in ppt and discussion on the topic Status and development of receivables and liabilities of non-financial enterprises in Slovakia. Solving and practicing examples on non-cash loans. 6. Students' presentation in ppt and discussion on the topic Assessment of creditworthiness of an enterprise and the content of an enterprise's application for a bank loan. Control test of the previous learning. 7. Students' ppt presentation and discussion on the topic Functions and tools of the central bank for monetary policy management. Solving and practicing examples of credit and interest cover and cost of credit. 8. Student presentation in ppt and discussion on the topic European Central Bank and tools for regulating Eurozone banks. Solving and practicing examples on loan- annuity repayment plans. 9. Student presentation in ppt and discussion on the topic Financing options for investments from the European Bank for Reconstruction and Development and other non-commercial financial entities (NDB, EXIM...). Solving and practicing examples on overdraft. 10. Presentation of students in ppt and discussion on the topic Status and development of leasing and factoring in Slovakia and abroad, obtaining financial resources in a selected enterprise in the form of leasing and factoring. Solving and practicing examples on leasing and factoring. 11. Presentation of students in ppt and discussion on the analysis of debt financing of the selected enterprise. 12. Student presentation in ppt and discussion on the use of debt financing in the selected enterprise, quantification of positive effects and negative effects . Credit paper on the material covered. 13. Review of acquired knowledge and final evaluation.