Book 1.5.docx - 1.5 Financial Markets and the Corporation Cash Flows To and From the Firm Passage of cash from financial markets to firm and from the

Book 1.5.docx - 1.5 Financial Markets and the Corporation...

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1.5 Financial Markets and the Corporation Cash Flows To and From the Firm Passage of cash from financial markets to firm and from the firm back to the financial markets Financial markets bring buyers and sellers together. Differences are the types of securities that are traded, how trading is conducted, and who the buyers and sellers are. Primary Versus Secondary Markets Primary market: original sale of securities by governments and corporations Secondary market: those in which these securities are bought and sold after the original sale In a primary market transaction, the corporation is the seller and the transaction raises money for the corporation. 1. Public offering: selling securities to the general public 2. Private placement: negotiated sale involving a specific buyer Public offerings of debt and equity must be registered with Securities and Exchange Commission (SEC). A secondary market transaction involves one owner or creditor selling to another. Secondary
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