Chapter 8 - BA 3341 Business Finance Nataliya...

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1 BA 3341 Business Finance Nataliya Polkovnichenko, Senior Lecturer
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2 Firms that wish to raise new capital may either borrow money (issue bond) or bring new “partners” into the business by selling shares of stock. Primary Market – Market for newly-issued securities, sold by the company to raise cash. - Initial Public Offering (IPO) - First offering of stock to the general public. - Seasoned Issue - Sale of new shares by a firm that has already been through an IPO. Secondary Market - Market in which already issued securities are traded among investors.
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3 Common Stock – Convey the Right to the Firm’s Residual Value After Other Claims Are Paid – Unlimited Life – Voting Rights – Dividends Vary Over Time – Returns Generated From Dividends and Capital Gains Preferred Stock (Hybrid) – Have Claims That Come Before Common Shares – Unlimited Life – Usually No Voting Rights – Dividends Are Constant Like Bond Coupons – Returns Generated From Dividend Stream – Sometimes Are Convertible to Common Shares – Although Dividends May Be Skipped, Dividends Are Often Cumulative
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4 Common Stocks and Dividends – Earnings are distributed to shareholders through dividends. – Market price of a stock reflects the value the market has placed on the right to receive future dividends. – Payment of dividends is not assured, and dividend policy
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This note was uploaded on 11/24/2009 for the course BA 3341 taught by Professor Polkovnichenko during the Fall '08 term at University of Texas at Dallas, Richardson.

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Chapter 8 - BA 3341 Business Finance Nataliya...

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