AEM1200-0207 (2)

Why supply side the normal transacting of business is

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Unformatted text preview: it; The Banks are institutions that agglomerate small quantities of money that Banks we want to have access to and obtain a profit from lending (secured we allocation) as opposed to investing (unsecured and variable value allocation) it; allocation) Different investors have different appetite for risk. Demand side Short term loans allow to even out variability; Long term loans allow to leverage capital... That is, if you can take a Long leverage ... loan, and the proceeds of your long term investment are greater than the principal and interest on the loan, you basically have made more money on the same capital investment!!! money Long term debt instrument issued by a Long corporation or government entity. corporation BOND BOND Bonds: Concepts Bonds: Coupon Rate/Interest Rate Principal Maturity Date Types - Unsecured/Debenture - Secured Sinking fund Callable Convertible Equity Capital Equity Money raised from within the firm or through the Money sale of ownership in the firm sale Retained earnings New equity Advantages of new equity Powerful motivational device (as options); Offers strong upsides to buyers; Easy to obtain in bull markets. Disadvantages of new equity Expensive (taxation and need to post dividends) Weakening of retained earnings Loss of control Two Classes of Stock Common Stock -- The most basic form; holders have the right to vote for the board of directors and share in the profits if dividends are approved. Preferred Stock -- Owners are given preference in the payment of company dividends before common stock div...
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