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Summary Corporate Finance, Investments and Risk Managment

ISBN-10 1307263852 ISBN-13 9781307263855
419 Flashcards & Notes
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A snapshot of the summary - Corporate Finance, Investments and Risk Managment ISBN: 9781307263855

  • 1 CF How Corporations Issue Securities Chapter 15

  • 1.1 College Vanaf Slide 23 moet nog

  • Financing comes basically from two sources. Which Two?
    1. Internal: Retained earnings
    2. External: Private and public
  • Which environment factors are essential for raising capital?
    • The legal environment
    • the financial system
    • ownership structure
  • What are the characteristics of Equity (Income, Tax status, Control, default)
    • Income: Dividends
    • Tax status: Dividends are taxed as personal income. Dividens are not a business expense
    • Control: Ordinary shares usually have voting rights
    • Default: Firms cannot be forced into bankruptcy for non-payment of dividends
  • What are the characteristics of Debt (Income, Tax status, Control, Default)
    • Income: Interest
    • Tax status: Interest is taxed as personal income. Interest is a business expens, and corporations can deduct interest when computing corporate tax liability
    • Control: Control is exercised with loan agreement.
    • Default: Unpaid debt is a liability of the firm. Non-payment results in bankruptcy
  • Name a few examples of Financial intermediaries/providers of capital:
    • Banks (Commercial)
    • Banks (Investment)
    • insurance companies
    • pension funds
    • charitable foundations
    • mutual funds
    • hedge funds
    • venture capital
    • venture banks
    • governments
  • What are the advantages of private capital vs Public capital?
    • Terms of private bonds and equities can be customized for individual investors
    • no costly registration with the securities regulator
    • no need tot reveal confidential information
    • Easier to renegotiate
  • What are the disadvantages of Private capital vs Public Capital?
    • Limited investor base
    • less liquid
  • What is a Qualified institutional buyer?
    Entity entitled under SEC rule 144A to purchase and trade private placements. (USDefinition)
  • What are the steps to obtain venture funding?
    • Prepare a busniess plan
    • Receive first-stage financing
    • receive subsequent staged financing
  • What is a General Cash Offer?
    Sale of securities open to all investor by an (Already Public) company.
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