Session 17

03-03-2026

The session focused on financing activities, features of common and preferred stock, and the case discussion on Byju’s financial crisis, which helped connect theory with real business situations.

Understanding financing activity conceptually made things clearer. Companies primarily use cash for capital expenditure and working capital, and when internal cash flows such as retained earnings and depreciation are not sufficient, they face a financing deficit. This forces them to raise external funds through debt or equity.

The features of common stock highlighted aspects like voting rights, election of directors, “one share one vote,” and proxy voting, which showed how shareholders participate in decision-making and control the company. In contrast, preferred stock offers preference in dividends and liquidation, along with features like cumulative dividends, but generally does not provide voting rights.

The Byju’s case made these concepts more practical. The company’s reliance on Term Loan B and venture debt showed how increasing dependence on debt creates pressure due to fixed interest obligations. When revenue generation does not match these commitments, it can lead to financial distress, legal consequences, and even loss of assets.

This made me understand that while debt can support expansion, poor financial planning and overexpansion can lead to serious financial instability.

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