may be made within corporate finance or managerial finance that matter
and wanted them or other decisions wise
I invest in capital projects now some businesses
won't have enough cash on hand to actually creates
or invest in these its huge capital projects so we'll need to go
the market to raise cash now we have the market here
run the rates nonetheless we have the corporation
so the two different ways that they can go to you the market and actually raise
cash
or I should save that one for later
actually meant to click this one because 30 different ways we can go boats
you mean s is by equity financing
or or debt financing and equity financing have to do with
shareholders so
basically taking on shareholders within our corporations you can wait
on a piece of the pie and of course
we have dat plant in which is bondholders
where they don't get apiece
up our corporation now the flow cash is gonna look like this
the one that I just up but up accidentally work
the financial markets are actually going to invest in our corporation
for your shares or bonds in a course what we're going to do is we're going to
sell
shares or bonds with Dan on our company
so we're giving ownership or we're gonna give of some
thats that will pay back at a later date with
interest now there are certain rates for each taper user whether you are a
shareholder a bondholder
of course the shareholders have ownership
and they have are claiming residual assets
course that bigger bankrupt in a share of the profits when we
issue dividends and bondholders
now bondholders they have no ownership so when are giving away
any part apart corporation or company
and they have first claim to residual assets in case we go bankrupt so
if we do go bankrupt bondholders are going to get first dibs on the assets
before shareholders get anything and that's just the way it works because
on their more about risk-averse
type investment bonds so they always get
first claimants you i any assets that are left over and bankruptcy proceeding
them course
you get the pics interest a man so if be
if they purchase of a one thousand dollar beers value bonds
that means they're gonna get one thousand dollars back at maturity
and oversee entrust so we have a5 percent interest rate annually able get
fifty dollars a year out entranced
and of course they also have the opportunity serum
put us in bankruptcy agreements interest payments because
missed an interest payment is an active insolvency
and that would allowed the bondholders to maybe come together
and on the Clarets be impossibly
close to bankruptcy in a mighty but I S an
a situation like this so you always need to your BP near bondholders because
that is a guarantee that you promised saddam and of course
this this this flow Bassett service flow catch the corporation can be reversed
in the OPs that way so I'll show you what I mean by
about so let me just get rid a securities things are you here
got a lot of stuff up so the flow cash
I wanna keep the tailhook course I'm just going to get rid of
this and show you how the errors can can I reverse themselves
so essentially instead I'll
financial markets purchasing investments the corporation
can purchase can buy shares
or bonds I and the financial market and of course
the financial markets who
can cell I S
investments now why would be want to do this isn't it
with the whole purpose just you finance and raise money for corporation
and crotch X that we want you actually on
actually initiates actually grow our company well
what happened is yet it we need cash
in a short term
maybe maybe we need its on in 30 days maybe we need IDs
and ninety days what we can do is we can invest by cash
into you YouTube dats something like T-bills which are treasury bills
or something like thirty days
which is among for 90 days riches three months
and we can receive a little bit of entrust while we know that the caches
entirely saying that will gather cash back wait when we need it
or if we don't have any use for cash
and the short term and or the long-term weekend bested
an shares
other corporations corporations
so it can work either way I just wanted to show that
the be financial markets in a corporation is this kinda
reciprocal nature which region you there
buy securities or we can sell securities to others
in the market so cash goes back for
I between the corporation and financial markets whether we're issuing
i'm new bonds are new shares or rather where urge seen
investments up from the marketplace
and I should also know it's that different types the financial markets
are things like that yes extra stock exchange
we also have New York Stock Exchange
we have the nasdaq
you got the Dow Jones Industrial so there's many
different markets in which shares are available on
but of course a short term dad is only
I is not available and he's is capital markets they're available in a different
market which Walker talk about
and the max tutorial but I just wanted to basically
I summarize the points that's these financial markets
are incredibly integral to the corporation
and that's we need on
for financing purposes
and for you they're short or long term
investment hertz is because we didn't have financial markets
you might have to go I to the bank and get a loan instead a
baby during equity financing our debt financing
which might be a little bit cheaper I like this all tracks played
bondholders or or rates shares so but the specially when I want to cover her
the corporation
and ob the the circular kinda reciprocal nature between the financial markets so
I hope you understood that and thanks for visiting..
No comments:
Post a Comment