Summary: Corporate Finance, Investments And Risk Managment | 9781307263855

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• 1 CF How Corporations Issue Securities Chapter 15

• 1.1 College Vanaf Slide 23 moet nog

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• 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.