AFM 191 - chp.1.3 - Private vs public companies Flashcards
How do private companies go public?
through an IPO
How do most companies start as?
as a privately held company
define a privately held company
a small group of private investors provides capital in return for a private stock
Provide the different types of private shareholders
- founders
- seed/angel investors
- venture capital firms
- private equity firms
Define founders
individuals that come up with a business idea and start-up a business and mostly own private stock
define angel investors
wealthy individuals that provide financing to start-up a business in return for ownership. usually founder’s family or friends that support the founder’s idea.
define venture capital firms
firms that provide funding to high-potential privately-held start-ups and small companies in return for ownership
define private equity firms
firms that provide funding to high-growth small + medium-sized privately held businesses in return for ownership
Define an initial public offering (IPO)
the first time a privately held company issues share in a public stock market
define publicly held comapnies
companies that can sell their stock to public investors in exchange for cash. public companies must have outstanding shares listed on a stock exchange to sell stocks.
What’s the typicaly equity investmsnet life cycle of a company
as a private company
1. seed investment
2. angel investment
3. venture capital/private equity investment
transition to public company
4. IPO
5. secondary public offerings
what can both private and public companies obtain as financing
bank financing
What’s the difference between accounting standards between private and public companies
private companies can follow ASPE or IFRS
public companies must follow IFRS
what’s the different between audited financial statements between public and private companies
private companies are not required to prepare audited financial statements
public companies are required to prepare audited financial statements.
What’s the difference between investors/owners in private and public comapnies
private company investors include founders, angel investors, venture capital, and private equity firms
public company investors include public shareholders.
what’s the difference in financing between public vs private companies?
private companies cannot obtain financial from public financial markets
public companies can obtain financing from public financial markets.
what’s the difference in availability of info in private vs public companies
financial info of private companies is not publicly available
financial info of public companies is publicly available.
what’s the difference between board of directors (BOD) in private and public companies
private companies can choose to have a BOD or not
public companies must have a BOD.
what’s the similarity in private + public companies when it comes to bank financing
both types of companies can borrow money rom the bank
What’s similar to public + private companies when it comes to bond issuance
both types of companies can issue bonds but it’s more common for public companies to do so.
what’s similar in private + public companies in internal reporting
both types of companies prepare internal reports for their internal stakeholders
What’s similar in private + public companies in external reporting
both private and public companies prepare external reports for their external stakeholders.
what is an alternate name for angel investors?
private or seed investors.
