Date post: | 03-Apr-2018 |
Category: |
Documents |
Upload: | hamis-rabiam-magunda |
View: | 219 times |
Download: | 0 times |
of 19
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
1/19
2- 1
Fundamentals
of Corporate
Finance
Sixth Edition
Richard A. Brealey
Stewart C. Myers
Alan J. Marcus
Slides by
Matthew Will
Chapter 2
McGraw Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved
Why Corporations NeedFinancial Markets and
Institutions
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
2/19
2- 2
Topics Covered
The Importance of Financial Markets andInstitutions
The Flow of Savings to Corporations
Functions of Financial Markets and ofFinancial Intermediaries
Value Maximization and the Cost of Capital
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
3/19
2- 3
Financial Markets
Primary
Markets
Secondary
Markets
OTC
Markets
Money
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
4/19
2- 4
Financial Markets
Financing DecisionSource of Funds Capital
Capital Structure
Money MarketsEuros
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
5/19
2- 5
Financial Markets
Company
Issue Securities
Cash
InvestorsCashReinvested
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
6/19
2- 6
Corporation
Investment
in real assets
Investorsworldwide
Financial markets
Stock marketsFixed-income markets
Money markets
Markets for
Commodities
Foreign exchange
Derivatives
Financial
Intermediaries
Mutual FundsPension funds
Financial Institutions
Banks
Insurance companies
Reinvestment
Financial Markets
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
7/19
2- 7
Financial Institutions
Company
Intermediaries
Banks
Insurance Cos.
Brokerage Firms
Obligations
Funds
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
8/19
2- 8
Financial Institutions
Intermediaries
Investors
Depositors
Policyholders
Investors
Obligations
Funds
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
9/19
2- 9
Financial Markets
Bank ofAmerica
ExplorerFund
Investors
$ $
Sells
shares
Issues
shares
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
10/19
2- 10
Financial Markets
Funds
Funds
Banks
Insurance Cos.
Brokerage Firms
Obligations
Depositors
Policyholders
Investors
Obligations
Company
Intermediary
Investor
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
11/19
2- 11
Financial Markets
Banks
Depositors
$2.5 mil
Cash
Loan
Deposits
Company
Intermediary
Investor
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
12/19
2- 12
Financial Markets
Insurance
Company
Policyholders
$2.5 mil
Cash
Issue Debt
Sell policies
Company
Intermediary
Investor
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
13/19
2- 13
Total U.S. Financing
9.5
28.1
1020.6
5.4
14.2
12.3 Households
Rest of world
Banks
Insurance Cos
Pension Funds
Mutual Funds
Other
% Holdings of Corporate and Foreign Bonds (Qtr 3, 2007)
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
14/19
2- 14
Total U.S. Financing
27.1
12.6
0.3822.3
28.3
1.4Households
Rest of world
Banks
Insurance Cos
Pension Funds
Mutual Funds
Other
% Holdings of Corporate Equities (Qtr 3, 2007)
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
15/19
2- 15
Function of Financial Markets
Transporting cash across time Risk transfer and diversification
Liquidity
Payment mechanism Provide information
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
16/19
2- 16
U.S. Financing
Information Provided by Financial Markets Commodity prices
Interest rates
Company values
Credit Rating Interest Rate
AAA 5.71%
AA 5.78
A 6.38
BBB 7.12BB 9.84
B 10.82
Source: Bloomberg Composite Corporate Bond
Indexes.
Interest rates on 30-year corporate bonds,
February 2008.
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
17/19
2- 17
Value of Alaska Air Group
Data as of January, 2008
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
18/19
2- 18
Value Maximization
7/28/2019 9ffc5ee1de8596a9d5dc9a56c8063bea
19/19
2- 19
Web Resources
http://www.fmcenter.org/http://www.federalreserve.gov/http://www.cftc.gov/cftc/cftchome.htmhttp://www.sec.gov/http://www.us-banker.com/http://www.americanbanker.com/http://www.fmcenter.org/http://www.federalreserve.gov/http://www.cftc.gov/cftc/cftchome.htmhttp://www.sec.gov/http://www.us-banker.com/http://www.us-banker.com/http://www.us-banker.com/http://www.americanbanker.com/http://www.morningstar.com/http://www.ici.org/http://www.fibv.com/http://www.rba.co.uk/sources/stocks.htmhttp://www.nasdaq.com/http://www.nyse.com/http://www.morningstar.com/http://www.ici.org/http://www.fibv.com/http://www.rba.co.uk/sources/stocks.htmhttp://www.nasdaq.com/http://www.nyse.com/