Financial Management - Chapter 14

Public Offering– Firm issues securities, which aremade available to both individualand institutional investors.• Private Placement– Securities are offered and sold to alimited number of investors.Primary Market–Market in which new issues of asecurity are sold to initial buyers.• Secondary Market–Market in which previously issuedsecurities are traded.
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Financial Management - Chapter 14Ch. 14 - Rising Capital in The Financial Markets © 2002, Prentice Hall, Inc.Q: What are SECURITIES? A: Financial Assets that Investors purchase hoping to earn a high rate of return. Types of Securities• Treasury Bills and Treasury Bonds• Municipal Bonds• Corporate Bonds• Preferred Stocks• Common StocksWhich of these are RISKY?Which promise HIGH RETURNS?Is there a relationship between RISK and RETURN? Corporate Financing Sources• In 1999, over $400 billion in external corporate financing was raised.• From 1996 through 1999, capital has been raised through the following sources:• Corporate Bonds and Notes 75.3%• Equities 24.7% Movement of Savings• Direct Transfer of Funds Movement of Savings• Direct Transfer of Fundssaver Movement of Savings• Direct Transfer of Funds firmsaver Movement of Savings• Direct Transfer of Funds cash firmsaver Movement of Savings• Direct Transfer of Funds cash firmsaver securities Movement of Savings• Indirect Transfer using Investment Banker Movement of Savings• Indirect Transfer using Investment Banker investment banker Movement of Savings• Indirect Transfer using Investment Banker investment banker firm Movement of Savings• Indirect Transfer using Investment Banker funds investment banker firm Movement of Savings• Indirect Transfer using Investment Banker funds investment banker firm securities Movement of Savings• Indirect Transfer using Investment Banker funds saver investment banker firm securities Movement of Savings• Indirect Transfer using Investment Banker funds funds saver investment banker firm securities Movement of Savings• Indirect Transfer using Investment Banker funds funds saver investment banker firm securities securities Movement of Savings• Indirect Transfer using a Financial Intermediary Movement of Savings• Indirect Transfer using a Financial Intermediary financial intermediary Movement of Savings• Indirect Transfer using a Financial Intermediary financial intermediary firm