F2 Analysis of financial perfromance and position

he creditor hierarchy is the order in which different groups of creditors (people or institutions owed money by a company) are paid if the company goes bankrupt or liquidates its assets. Typically, the order is:

Secured creditors: These have loans backed by company assets (like banks with a mortgage on property). They get paid first from the proceeds of those assets.
Unsecured creditors: These do not have specific assets as collateral. Examples include suppliers, contractors, or bondholders.
Subordinated creditors: These agree to be paid after other unsecured creditors; they take on more risk.
Shareholders/owners: They are last in line and only get paid if anything is left after all creditors are paid.

Short-term financial instruments used for borrowing and lending, typically for durations of a year or less.

Certificates of deposit, commercial papers, and Treasury bills.

Money market instruments are short-term, while bonds are long-term financial instruments.

Private sector banks

A short-term loan instrument issued by the government.

Bonds are generally repaid over a longer period, such as three to five years.

Interest payments during the holding period, with the principal repaid at maturity.

Dividend cover indicates how many times a company’s earnings can cover its current level of dividend payments.

Divide Earnings Per Share (EPS) by dividends per share.

It shows how secure dividend payments are, as ordinary shareholders are not guaranteed dividends.

The percentage return an investor can expect from a share, based on its market price and dividend

Investors seeking short-term returns are more interested in high dividend yields.

Interest in long-term growth may lead investors to focus on the P (Price/Earnings) ratio instead.

It provides insights into a company’s market confidence and outlook, not specifically its dividend policy.