《公司金融》Chapter_14 An Overview of Corporate Financing.ppt

Lu Yurong Topics Covered Patterns of Corporate Financing Common Stock Preferred Stock Debt Financial Markets and Institutions Patterns of Corporate Financing Firms may raise funds from external sources or plow back profits rather than distribute them to shareholders. Should a firm elect external financing, they may choose between debt or equity sources. Patterns of Corporate Financing Patterns of Corporate Financing Patterns of Corporate Financing Patterns of Corporate Financing Common Stock Book Value vs. Market Value Book value is a backward looking measure. It tells us how much capital the firm has raised from shareholders in the past. It does not measure the value that shareholders place on those shares today. The market value of the firm is forward looking, it depends on the future dividends that shareholders expect to receive. Common Stock Example - Heinz Book Value vs. Market Value (5/2000) Total Shares outstanding = 347 million Common Stock Example - Mobil Book Value vs. Market Value (5/00) Total Shares outstanding = 347 million Preferred Stock Preferred Stock - Stock that takes priority over common stock in regards to dividends. Net Worth - Book value of common shareholder’s equity plus preferred stock. Floating-Rate Preferred - Preferred stock paying dividends that vary with short term interest rates. Corporate Debt Debt has the unique feature of allowing the borrowers to walk away from their obligation to pay, in exchange for the assets of the company. “Default Risk” is the term used to describe the likelihood that a firm will walk away from its obligation, either voluntarily or involuntarily. “Bond Ratings”are issued on debt instruments to help investors assess the default risk of a firm. Corporate Debt Corporate Debt Prime Rate - Benchmark interest rate charged by banks. Funded Debt - Debt with more than 1 year remaining to maturity. Sinking Fund - Fund established to retire debt before maturity. Callable Bond - Bond that may be repurchase