Day_29_-_FinExp_(Equity)1[1]

Day_29_-_FinExp_(Equity)1[1] - Financing Expansion Equity...

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Financing Expansion - Equity Day 29
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Financing Expansion - Equity Marketing indicates that more bikes can be sold… Operations Management indicates that the factory is  already operating at capacity, and that an investment in additional capacity should be made… So where will the funds come from?
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External financing When the firm is unable to fund growth internally, outside  investors are needed.  There are two sources of external  financing: Debt  (financing provided by lenders/creditors)   Banks Bondholders  Equity  (financing provided by shareholders/stockholders)  Preferred stockholders  Common stockholders (Common Stock in MikesBikes)
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Equity  The Shareholders’ Equity section of a firm’s  Balance Sheet typically contains 2 elements: 1. Share Capital,  including Preferred stock … so-named because of their “preferential” treatment over  common stock; and Common stock  … which will be our focus in class coverage. 1. Retained Earnings … which consists of the firm’s cumulative net income less any  dividends paid out (i.e., that portion of the firm’s earnings  which are reinvested/retained). 
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Common stock characteristics   All corporations issue common stock (C-S). C-S holders are the residual owners of the firm. Residual  claim on income  receive dividends after creditors, taxes, and preferred  stockholders have been paid, and only  at the  discretion of the firm’s directors Residual  claim on assets
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Day_29_-_FinExp_(Equity)1[1] - Financing Expansion Equity...

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