Corporate Finance 2

Corporate Finance 2 - Secondary All subsequent trading...

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Mutual funds Professional managed with investment objective Load or no load- commission ETF (Exchange Traded Fund) Ownership can be bought and sold on stock exchange Both cost effective way to diversify and reduce risk Hedge Funds Like mutuals but tend to take more risk and are generally open only to higher net worth investors Management fees higher and included incentive fee based on funds overall performance runs approx 20% Private Equity Firms Private equity firms include two major groups: VC or Venture Capital/ Leveraged Buyout Cos VC- raise $ from investors use to provide $ for startup cos LBO- acquire est firms not performing well make profitable again and sell. Uses debt to fund purchases Security Negotiable instruments that reps financial claim ownership or debt agreement (stocks/bonds) Securities market allow busi and indiv investors to trade secs issued by pubcorps Primary market Market in which securities exchanged for the first time (IPOs) Co gets financing
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Unformatted text preview: Secondary All subsequent trading Issuing firm des not receive any new financing since exchange between 2 ppl Process of raising money in securities market Sell invest Distribute, cont to trade in sec Types of securities Debt secs: firm borrow money by selling debt in debt market Less than one year not traded in mm More bond in capmark Bonds Fixed interest on face or par value Coupon rate- interest payment Equity- ownership of corp Common stock Earn return after all other security holder claims are satisfied in full (residual owners) Dividend not fixed or guaranteed. Co can reinvest in new project and not pay divs Preffered stock Debt and equity hybrid Diveidesns before common stockholders Paid before stock holdrs in bankrupcy Stock Market Pub market in which stocks of cos traded Organized sec exchange or OTC (over the counter) Organized Physical ie NYSe OTCs Everyone other than org ie NASDAQ "screen-based, floorless market"...
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