Term
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Definition
| Capital markets, a venue for firms to raise capital via equity (IPO) or debt. Hire investment banks to manage the IPO, value the price per share of stock, etc. |
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Term
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Definition
Equity = Assets - Liabilities
It also equals ownership, by owning stock you own a portion of the company. |
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Term
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Definition
Initial Public Offerings
taking a private firm public |
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Term
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Definition
- Raise Capital to run/grow the business
- Take a private firm, public (IPO)
- Private equity firms/investors generate best returns by taking one of their private porfolio companies public via IPO
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Term
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Definition
| The breakdown of total capital raised by a firm |
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Term
| Characteristics of Bonds (Debt) |
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Definition
- bondholders are creditors
- No voting rights
- get prior claims on profits and assets in bankruptcy
- Rate of return req. by bondholders is typically lower than by stockholders
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Term
| Characteristics of Common Stock (Equity) |
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Definition
- Stockholders are owners w Limited Liability
- Voting Rights
- Dividend payments can be variable
- rate of return required by stockholders is typically greater than that by bondholders
- Residual claimant (get paid last)
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Term
| Why is Capital Structure Important? |
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Definition
| The more debt used relative to equity the more leverage is used --> leverage can increase returns, but can also be harmful if structure consists of too much debt. |
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Term
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Definition
very similar to bonds, less commonly issued
- No voting rights
- Fixed dividends
- often cumulative dividends
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Term
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Definition
- Issues by banks
- Foreign securities underlying
- Traded on US exchanges or outside parent co. (ADR)
- Reduced admin costs
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Term
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Definition
- US - A & B (different voting rights)
- China
- A shares - trade on Shanghai and Shenzhen exchanges. Not available to foreign investors.
- B Shares - Also listed on Shanghai and Shenzhen exchages but trade in USDHKD. allowing foreign investors to take part.
- H Shares - Chinese copanies listed on Hong Kong stock exchange and in HKD
- Brazil
- Preferred stock, ordinary
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Term
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Definition
| The combined affect of price appreciation and dividend income. |
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Term
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Definition
| "Market Makers" that provide liquidity to buyers and sellers. They buy at the bid price. |
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Term
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Definition
=ask price - bid price
it is a measure of liquidity and risk |
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Term
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Definition
| Risk is measured by volatility, which is a standard deviation annualized of logarithmic returns |
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