Corporate finance 2 (Stocks)

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Transcript Corporate finance 2 (Stocks)

HW check
Vocabulary, MK p 82
1 cash flow
2 equity
3 mutual funds
4 pension funds
5 principal
6 maturity
7 coupon
8 insolvent or bankrupt
9 creditors
10 dividends
11 market makers
12 bid / bid price
13 offer / offer price
14 yield
Match up verbs with nouns
borrow money
deduct interest payments
finance activities
issue shares
issue bonds
pay (a rate of) interest
pay a (higher) return
pay dividends
pay tax
receive interest payments
raise money
repay principal
sell assets
deduct tax
receive dividends
repay bonds
repay money
sell bonds
HW check: MK, p 81
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•
•
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Meaning of T-notes, T-bonds and gilts?
Who are market makers?
Bid vs. offer price?
What is a spread?
What is inversely related?
What does the yield of a bond depend on?
More about bonds (MK, p.81)
• Meaning of T-notes, T-bonds and gilts?
dged stock (UK)
Treasury notes, treasury bonds and gilt-e_____
SECURITIES*: BONDS (U16)
DEBT FINANCING ( = loans)
Risk rating: AAA (best) to C (worst)
Companies:
BONDS
Governments:
LONG-TERM BONDS:
an interest paying
GILTS – GB
loan
TREASURY BONDS-USA
which can be traded
T-bonds (10+ yrs)
on bond markets
TREASURY NOTES-USA
securities, papers
T-notes (less than 10 yrs)
* vrijednosnice
SHORT-TERM BONDS:
TREASURY BILLS (one-year)
More about bonds (MK, p.81)
• Meaning of T-notes, T-bonds and gilts?
dged stock (UK)
Treasury notes, treasury bonds and gilt-e_____
• Who are market makers?
rokerage companies which q____
uote bid and offer price.
Banks & b________
• Bid vs. offer price?
Bid
_____ – the highest price that the buyer is willing to pay
_____ – the price asked by sellers
Offer
• What is a spread?
ifference between the bid & offer prices (bid/ask or buy/sell)
D________
• What is inversely related?
nterest r____
ate in the economy & the price of existing bonds.
I_____
• What is the yield of a bond and what does it depend on?
ncome given by a bond. It depends on its c______
oupon and its
I______
purchase price.
More about bonds (MK, p.81)
• Meaning of T-notes, T-bonds and gilts?
Treasury notes, treasury bonds and gilt-edged stock (UK)
• Who are market makers?
Banks & brokerage companies which quote bid and offer price.
• Bid vs. offer price?
Bid – the highest price that the buyer is willing to pay
Offer – the price asked by sellers
• What is a spread?
Difference between the bid & offer prices (bid/ask or buy/sell)
• What is inversely related?
Interest rates in the economy & the price of existing bonds.WHY?
• What is the yield of a bond and what does it depend on?
Income given by a bond. It depends on its coupon and its
purchase price.
Debt Finance vs. Equity Finance
(MK, p.81)
BONDS
ADVANTAGE
DISADVANTAGE
FOR INVESTORS FOR ISSUERS
Debt Finance vs. Equity Finance
(MK, p.81)
BONDS
FOR INVESTORS FOR ISSUERS
ADVANTAGE
generally safer
bond interest is
tax deductible
WHAT DOES IT
MEAN?
DISADVANTAGE
shares pay a
higher return
debt increases a
company’s
financial risk
HOW?
Comprehension CHECK, MK p 82
1
F
Can you explain your answer?
2
T
3
T
4
F
5
T
6
F
7
F
8
F
Words/expressions to remember?
issue, mature, insolvent, coupon, tax advantages
Stocks vs. Bonds (video) HANDOUT
http://www.investopedia.com/video/play/stocks-versus-bonds
Stocks and bonds are the two biggest
omponents
ortfolios
c____________
of most p_________...
Stocks
ong erm g_____
usually provide a l____-t____
rowth and bonds
tend to ensure a s_____
teady i______
ncome s_____....
tream
ocal and n_______
ational
Bonds can be bought from l____
ajor
orporations and a
g__________
c__________,
overnments and m_____
careful selection of stocks will include both
arge
mall c___________
ompanies
l______
and s_____
from a
iverse group of i_________.
ndustries A combination of
d______
stocks and bonds is good for all kinds of investors.
Stocks vs. Bonds (video), cont.
rowth
For aggressive investors who want g_________,
alance the risk of stocks and
bonds may b______
ps and d_____
owns of the market,
stabilize the u____
while stocks can help r___
isk a_____
verse investors
edge against the risk of inflation. Thus, stock
h____
purchases will provide high reward and help to
hedge against inflation while bonds give you a
afety n___
et against stock market
dependable s_____
losses.
REVISION
FOUR TYPES OF ORGANISATIONS IN
THE PRIVATE SECTOR
1) WITH UNLIMITED LIABILITY
Sole proprietorship
• __________________
Partnership
• ______________
2) WITH LIMITED LIABILITY
Private limited company
• ___________________
Public limited company
• ___________________
REVISION
LIMITED vs. UNLIMITED
LIABILITY FOR DEBT
In businesses with limited liability, owners
are responsible* for their company’s debts
up to a certain amount if it goes out of
business, and do not have to sell their
personal assets to repay the debts.
liable
* ______
Source: Longman Business English Dictionary
LIMITED COMPANIES
entity (independent legal existence from its
• a legal ______
shareholders)
• shareholders have limited liability (liable for the
invested
amount of capital ________)
liquidated and
• in case of bankruptcy, assets are __________
the company is wound up.
•
•
•
•
•
•
LIMITED COMPANIES
up the capital (divided into shares)
owners put ___
vote at
shareholders can _______the
AGM and take a
share of the profit through dividend
of Directors and a
shareholders elect a Board
_______________
Chairperson
appoint
the BoD ________managers
to run day-to-day
business
drawn up : the
documents which need to be ________
Memorandum of Association and Articles of
Association
Registrar of Companies issues a Certificate of
Incorporation
Synonyms
British English
companies
shares/stock
EQUITIES
shareholders
ordinary shares
preference shares
flotation
Annual General Meeting
Articles of Association
Memorandum of Assoc.
authorised share capital
property
American English
corporations
stocks
stockholders
common stock
preferred stock
initial public offering
Annual Stockholders M.
Bylaws
Certificate of Incorporation
authorized capital stock
real estate
STOCKS
•
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Securities*:
Stocks – equity financing
Bonds – debt financing
money market instruments:
• (derivatives, futures, options)
- * vrijednosnice, vrijednosni papiri
MK, p 87: Reading Stocks and Shares
1J
2D
3A
4F
5G
6C
7K
8E
9I
10H
11L
12 B
Handout: STOCKS & SHARES (1)
private
1. Most companies begin as …………….
limited companies.
2. If they want to grow / expand they must
raise capital.
……….
3. One way to obtain capital for growth is to
go public, i.e. apply to the stock exchange to
………..
become a public limited comp.
4. Smaller or newer companies usually sell
their shares on the over-the-counter
………….……. markets.
STOCKS & SHARES (2)
5. Issuing shares for the first time is known as
floating a company (making a …….........)
flotation or
…………
_
_.
I P_ O
6. To guarantee to purchase all the securities at an
agreed price on a certain day, if they cannot be
underwrite
sold to the public: to
……………....
7. After stocks have been issued they can be
secondary market at the stock
traded on the ....................
listed
exchange on which the company is ..................
nominal value of a share – the price written
8. The ..............
on it – is rarely the same as its market price.
A period in which most stocks fall in value is called a
bear market, and the period during with most stocks (&
............
index are rising is called a .........
bull market.
the stock .........)
Handout: match phrases
with the same meaning
Issuing stocks and offering
them for sale
To underwrite a stock issue
Equity
Market makers
How many sellers and
buyers there are
The price a stock is currently
being traded at on the s.e.
A period during which stocks
are rising
Bear market
A period during which stocks
are falling
Supply and demand
Market price
Bull market
Traders in stock who quote
bid & offer prices
To guarantee to buy the
stocks if there are no
other buyers
Stocks or shares
Going public
Vocabulary: match phrases with the
same meaning
Issuing stocks and offering
them for sale
To underwrite a stock issue
Equity
Market makers
How many sellers and
buyers there are
The price a stock is currently
being traded at on the s.e.
A period during which stocks
are rising
Bear market
Going public
To guarantee to buy the
stocks if there are no
other buyers
Stocks or shares
Traders in stock who quote
bid & offer prices
Supply and demand
Market price
Bull market
A period during which stocks
are falling
HW: RB, p 79
VI Write a summary (200-300 words) of the
text based on the notes above