Topic 1: Intro To Corporate Finance

Question 1

What is a company?

Answer 1

A distinct legal entity or ‘person’ separate and distinct from it’s owners.

Question 2

What is Corporate Finance

Answer 2

Includes:
Investment decisions - What long term investments will be made?
Financing decisions - Where will you get long term financing?
Liquidity decisions - How will you manage your everyday activities?

Question 3

Capital Budgeting

Answer 3

The process of planning and managing a company’s long-term investments

Question 4

Capital Structure

Answer 4

The mixture of long-term debt (borrowing) and equity (Owner’s investment) maintained by a company

Question 5

Working Capital Management

Answer 5

The management of a company’s short-term assets and liabilities

Question 6

Securities

Answer 6

Includes a wide array of investments, such as stocks, bonds, notes, debentures, limited partnership interests, oil and gas interests, and investment contracts.

Question 7

Primary Financial Market

Answer 7

Where securities are created and sold to the investors

First share issue is called an Initial Public Offering (IPO). - Stocks are sold to the public for the first time

Money that is raised goes to the issuing company

Second Issue of shares is called a Seasoned Offering

Question 8

Secondary Financial Market

Answer 8

Investors trade securities with each other

Money that is raised goes to seller of securities

Share Prices