Financial Statements and
4 Key Financial Statements
Income statement summarizes operating performance for a
period. It compares
the revenues (wealth generated by the business through trading),
the expenses (wealth used up in
Practical Aspects of
Carrying out an NPV appraisal involves
1. Identify all the relevant cash flows and their timing.
2. Total the cash flows for each point in time.
3. Discount each total, according to the appr
Cost of capital estimations and the discount rate
Cost of capital estimations
Cost of capital (k) is the IRR for a set of cash flows, such that
current market price of the investment equals the sum of the
discounted values of all future ca
Lecture 9: The Secondary
Capital Market (the stock
exchange) & its Efficiency
Why Capital Markets
Capital markets facilitate the
transfer of capital (i.e. financial)
assets from one owner to another.
They provide liquidity.
Liquidity refers to how
Sources of Long-Term
Primary capital Market
a market for new capital.
Securities issued for the first time.
Any point of contact between a supplier and a user of
capital is part of the primary capital market.