1 Athens University of Economics and Business MSc in International Shipping, Finance and Management Corporate Finance George Leledakis
2 An Overview of Corporate Financing
3 Topics Covered Corporate Structure Role of the Financial Manager Patterns of Corporate Financing Common Stock Debt Financial Markets and Institutions Factoring
4 Corporate Structure Sole Proprietorships Partnerships Unlimited Liability Personal tax on profits Limited Liability Corporations Corporate tax on profits + Personal tax on dividends
5 Role of the Financial Manager (2) (1) Firm's operations Financial manager (4a) Financial markets (3) (4b) (1) Cash raised from investors (2) Cash invested in firm (3) Cash generated by operations (4a) Cash reinvested (4b) Cash returned to investors
6 Role of the Financial Manager Real assets Financial assets / Securities Capital markets and financial markets Investment / capital budgeting Financing / capital structure Payout policy / dividend or share buy back
7 Patterns of Corporate Financing How Firms Raise Funds Plowing back profits Seeking external financing Debt sources Equity sources
8 Patterns of Corporate Financing Internal funds Net equity issues Net borrowing 100% 50% 0% -50% -100%
9 Modern Types of Financing Factoring Venture Capital Convertible Bonds Leasing M&A Securitization
10 Patterns of Corporate Financing Aggregate balance sheet for manufacturing corporations in the United States, 2003 (figures in Billions). Current assets $ 1,530 Current liabilities $ 1,213 Fixed assets 2,410 Long term debt 1,050 Less 1,272 Other long term 761 deprecication liabilities Net fixed assets 1,138 Total long term liabilities 1,811 Other long term 2,310 Stockholders' equity 1,964 Total assets 4,978 Total liabilities and 4,978 stockholders' equity
11 Patterns of Corporate Financing How do we define debt? Debt Total assets 1,213 1,811 4, Long termliabilitie s Long termliabilitie s equity 1,811 1,811 1,964.48
12 Debt Ratio, % Debt Ratios (D/E) Debt to Net Worth for Non-Financial Firms, % Market Debt Ratio Book Debt Ratio 50% 40% 30% 20% 10% 0% Source: Board of Governors of the Federal Reserve System, Flow of Funds Table B.102
13 Sweden Germany Austria France USA Belgium Japan Denmark Portugal Spain Finland Netherlands Debt ratio. percent Patterns of Corporate Financing (Debt to total assets)
14 Common Stock Book Value vs. Market Value Book value is a backward looking measure. It tells us how much capital the firm has raised from shareholders in the past. It does not measure the value that shareholders place on those shares today. The market value of the firm is forward looking, it depends on the future dividends that shareholders expect to receive.
15 Holdings of Corp Equities (2008) Rest of World 11.7 Other 1.9 Households 35.7 Mutual Funds, etc Insurance Companies 7.5 Pension Funds 19.2 Percent of Holdings
16 Preferred Stock Preferred Stock - Stock that takes priority over common stock in regards to dividends. Net Worth - Book value of common shareholder s equity plus preferred stock. Floating-Rate Preferred - Preferred stock paying dividends that vary with short term interest rates.
17 Issues with Common Stock Who owns the corporation? Voting procedures Majority voting Cumulative voting Dual class shares and private benefits the same cash-flow rights /different control rights REITs (Real Estate Investment Trusts) REITs were created to facilitate public investment in commercial real estate
18 Corporate Debt Debt has the unique feature of allowing the borrowers to walk away from their obligation to pay, in exchange for the assets of the company. Default Risk is the term used to describe the likelihood that a firm will walk away from its obligation, either voluntarily or involuntarily. Bond Ratings are issued on debt instruments to help investors assess the default risk of a firm.
19 Corporate Debt Prime Rate - Benchmark interest rate charged by banks. Funded Debt - Debt with more than 1 year remaining to maturity. Sinking Fund - Fund established to retire debt before maturity. Callable Bond - Bond that may be repurchased by firm before maturity at specified call price.
20 Corporate Debt Subordinate Debt - Debt that may be repaid in bankruptcy only after senior debt is repaid. Secured Debt - Debt that has first claim on specified collateral in the event of default. Investment Grade - Bonds rated Baa or above by Moody s or BBB or above by S&P. Junk Bond - Bond with a rating below Baa or BBB.
21 Corporate Debt Eurodollars - Dollars held on deposit in a bank outside the United States. Eurobond - Bond that is marketed internationally. Private Placement - Sale of securities to a limited number of investors without a public offering. Convertible Bond - Bond that the holder may exchange for a specified amount of another security.
22 Holdings of Corp Debt (2008) Other 26.4 Banks 4.5 Households 10.9 Pension Funds 6.5 Insurance Companies 19.9 Rest of World 21.3 Percent of Holdings Mutual Funds, etc. 10.5
23 Financial Manager Questions 1. Should the company borrow short term or long term? 2. Should the debt be fixed or floating? 3. Should you borrow dollars or some other currency? 4. What promises should you make to the lender? 5. Should you issue straight or convertible bonds?
26 Financial Markets and Institutions Financial Markets Used to raise money through primary issues Allow investors to trade amongst themselves Help firms manage risks Financial Intermediaries Raise money from investors, provide financing Banks, insurance companies, investment funds
27 Financial Assets of U.S. Intermediaries third quarter, 2011
28 Financial Markets and Institutions Investment Funds Mutual Fund Raises money by selling shares to investors Attempts to beat market Money Market Fund Invests in short-term safe securities Closed-End Fund Fixed number of shares
29 Financial Markets and Institutions Investment Funds Exchange-Traded Fund (ETF) Portfolio bought or sold in single trade Hedge Fund Restricted access Limited partnership Performance-related fees
30 Financial Markets and Institutions Financial Institutions Commercial banks Provide loans, safe money storage Investment banks Assist companies in raising financing Advise on takeovers, mergers, and acquisitions Insurance companies Invest in corporate stocks and bonds
31 The role of financial markets and intermediaries Payment Mechanism Allows individuals to make and receive payments quickly and safely over long distances Borrowing and Lending Channels savings towards those who can best use them
32 The role of financial markets and intermediaries Pooling Risk Allows individuals to share risk, i.e., insurance companies Information Allows estimation of expected rates of return
34 What is Factoring? Factoring is a transaction in which a business sells its accounts receivable, or invoices, to a third party commercial financial company, also known as a factor. This is done so that the business can receive cash more quickly than it would by waiting 30 to 60 days for a customer payment. Factoring is sometimes called accounts receivable financing.
35 Factoring The terms and nature of factoring can differ among various industries and financial services providers. Most factoring companies will purchase your invoices and advance you money within 24 hours. The advance rate can range from 80% to as much as 95% depending on the industry, your customers credit histories and other criteria. The factor also provides you back-office support. Once it collects from your customers, the factor pays you the reserve balances of the invoices, minus a fee for assuming the collection risk. Factoring is not a loan. No debt is assumed by factoring. The funds are unrestricted, providing a company more flexibility than with a traditional bank loan.
36 What are the Advantages of Factoring? There are several reasons why factoring is a valuable financial tool for many businesses. The key benefit is that factoring provides a quick boost to your cash flow. Many factoring companies provide cash on your accounts receivable within 24 hours. This can solve short-term cash flow issues and help fuel the growth of your business. Factoring companies handle your customer collections, and may also evaluate your customers credit and payment histories.
37 Some Other Major Benefits Include: Factoring can be customized and managed so that it provides necessary capital when your company needs it. The financing does not show up on your balance sheet as debt. Factoring is based on the quality of your customers credit, not your own credit or business history. Factoring provides a line of credit based on sales, not your company s net worth. Unlike a conventional loan, factoring has no limit to the amount of financing. Factoring aligns well with start-up businesses that need immediate cash flow.
38 Who Factors? Companies of all sizes, from one-person businesses to Fortune 500 corporations, use factoring as a way to increase their cash flow. Factoring spans all industries, including trucking, transportation, manufacturing and distribution, textiles, oil and gas. It is most common in industries such as clothing and toys. Companies use the cash generated from factoring to pay for inventory, buy new equipment, add employees, expand operations basically any expenses related to their business.
39 What is the Difference Between Recourse and Non-Recourse Factoring? Recourse means the client ultimately takes the responsibility for the payment of the invoice. Non-recourse factoring allows companies to sell their invoices to the factoring company, which assumes all of the credit risks for the collection of the invoice. Some factoring companies offer both recourse and non-recourse factoring.
40 What about Fees? There are, of course, costs to factoring, and the factor typically charges a fee of 1% or 2% for administration and a roughly similar sum for assuming the risk of nonpayment.
1 Regional Bank Regional banks specialize in consumer and commercial products within one region of a country, such as a state or within a group of states. A regional bank is smaller than a bank that operates
FINANCIAL INSTITUTIONS AND MARKETS T Chapter Summary Chapter Web he Web Chapter provides an overview of the various financial institutions and markets that serve managers of firms and investors who invest
Saving and Investing How does investing contribute to the free enterprise system? How does the financial system bring together savers and borrowers? How do financial intermediaries link savers and borrowers?
Wealth for Life Glossary Aggressive growth fund: A mutual fund that aims for the highest capital gains. They often invest in smaller emerging companies that offer maximum growth potential. Adjustable Rate
online report consulting group Glossary of Investment Terms glossary of terms actively managed investment Relies on the expertise of a portfolio manager to choose the investment s holdings in an attempt
Chapter 3 - Selecting Investments in a Global Market Questions to be answered: Why should investors have a global perspective regarding their investments? What has happened to the relative size of U.S.
ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015 Investment Adviser: RidgeWorth Investments A Shares C Shares I Shares Aggressive Growth Allocation Strategy SLAAX CLVLX CVMGX Conservative
Ipx!up!hfu!uif Dsfeju!zpv!Eftfswf Credit is the lifeblood of South Louisiana business, especially for the smaller firm. It helps the small business owner get started, obtain equipment, build inventory,
Review for Exam 1 Instructions: Please read carefully The exam will have 21 multiple choice questions and 5 work problems. Questions in the multiple choice section will be either concept or calculation
A Account A record of a business transaction. A contract arrangement, written or unwritten, to purchase and take delivery with payment to be made later as arranged. Accounts payable Money which you owe
University of California, Merced EC 121-Money and Banking Chapter 2 Lecture otes Professor Jason Lee I. Introduction In economics, investment is defined as an increase in the capital stock. This is important
a guide to Bond Mutual Funds A bond mutual fund is an investment company that pools money from shareholders and invests primarily in a diversified portfolio of bonds. Table of Contents What Is a Bond?...
Summary Prospectus October 30, 2015 Brown Advisory WMC Strategic European Equity Fund Class/Ticker: Institutional Shares / BAFHX Investor Shares / BIAHX Advisor Shares / BAHAX Before you invest, you may
An Introduction to Institutions, Management, & Investments TEMTH EBITIQM HERBERT B. MAYO The College of New Jersey *\ SOUTH-WESTERN t% CENGAGE Learning- Australia Brazil Japan Korea Mexico Singapore Spain
SPDR Wells Fargo Preferred Stock ETF Summary Prospectus-October 31, 2015 PSK (NYSE Ticker) Before you invest in the SPDR Wells Fargo Preferred Stock ETF (the Fund ), you may want to review the Fund's prospectus
Chapter 2 Characteristics of Investment Companies Abstract Chapter 2 provides a brief overview of five types of investment companies: open-end funds, closed-end funds, unit investment trusts, exchange-traded
Order Code RL34400 Economic Factors Affecting Small Business Lending and Loan Guarantees February 28, 2008 N. Eric Weiss Analyst in Financial Economics Government & Finance Division Economic Factors Affecting
Bond Valuation 1 Topics in Chapter Key features of bonds Bond valuation Measuring yield Assessing risk 2 Determinants of Intrinsic Value: The Cost of Debt Net operating profit after taxes Free cash flow
Chapter Nineteen Using Securities Markets for Financing & Investing Opportunities McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved. WARREN BUFFETT Berkshire Hathaway
Consolidated Interim Earnings Report For the Six Months Ended 30th September, 2003 23th Octorber, 2003 Hitachi Capital Corporation These financial statements were prepared for the interim earnings release
CHAPTER 17 Financial Management Chapter Summary: Key Concepts The Role of the Financial Manager Financial managers Risk-return trade-off Executives who develop and implement their firm s financial plan
1 : Understanding the Management Process Basic Management Functions 1. Planning - Establishing organizational goals and deciding how to accomplish them SWOT analysis - The identification and evaluation
January 2008 Bonds An introduction to bond basics The information contained in this publication is for general information purposes only and is not intended by the Investment Industry Association of Canada
An Overview of the US Closed-End Fund Market By Paul Mazzilli Introduction Closed-end funds (CEFs) are professionally managed investment companies that offer investors various unique benefits. They offer
Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS Peter N. Ireland Department of Economics Boston College email@example.com http://www2.bc.edu/~irelandp/ec261.html Chapter 2: An Overview of the Financial
Chapter 2 Practice Problems MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Assume that you borrow $2000 at 10% annual interest to finance a new
Chapter 10 Fixed-Income Securities Bond: Tradable security that promises to make a pre-specified series of payments over time. Straight bond makes fixed coupon and principal payment. Bonds are traded mainly
Financial Markets and Institutions Abridged 10 th Edition by Jeff Madura 1 23 Mutual Fund Operations Chapter Objectives provide a background on mutual funds describe the various types of stock and bond
Chapter 13 Investing in Bonds 13.1 Evaluating Bonds 13.2 Buying and Selling Bonds 2010 South-Western, Cengage Learning Standards Standard 4.0 Investigate opportunities available for saving and investing.
Banking,, Banking,, for the MFM Orientation September 1, 2010 Banking,, If you are going to work with bankers, traders, or investment managers, it is important for you to understand the language and concepts
READING 1 The Money Market Timothy Q. Cook and Robert K. LaRoche The major purpose of financial markets is to transfer funds from lenders to borrowers. Financial market participants commonly distinguish
Investments at a glance Canadian Securities Administrators Securities regulators from each province and territory have teamed up to form the Canadian Securities Administrators, or CSA for short. The CSA
Closed-End Funds Understanding Leverage in Closed-End Funds The concept of leverage seems simple: borrowing money at a low cost and using it to seek higher returns on an investment. Leverage as it applies
SURVEY OF INVESTMENT REGULATION OF PENSION FUNDS OECD Secretariat Methodological issues The information collected concerns all forms of quantitative portfolio restrictions applied to pension funds in OECD
Financial Structure and International Debt Market 1. Optimal Financial i lstructure 2. Financial Structure of Foreign Subsidiaries 3. Debt Management and Funding Goal 4. International Debt Markets 5. Rating
Glossary: The ETF Portfolio Challenge Glossary is designed to help familiarize our participants with concepts and terminology closely associated with Exchange- Traded Products. For more educational offerings,
Savings and Investing Consumers can use any money left over from purchasing goods and services toward savings or investing. Saving means putting money aside for future use. Investing is using savings to
Because money doesn t come with instructions.sm Robert C. Eddy, CFP Margaret F. Eddy, CFP Matthew B. Showley, CFP Basic Investment Terms ANNUITY A financial product sold by financial institutions pay out
Understanding Fixed Income 2014 AMP Capital Investors Limited ABN 59 001 777 591 AFSL 232497 Understanding Fixed Income About fixed income at AMP Capital Our global presence helps us deliver outstanding
Understanding a Firm s Different Financing Options A Closer Look at Equity vs. Debt Financing Options: A Closer Look at Equity vs. Debt Business owners who seek financing face a fundamental choice: should
GLOSSARY OF TERMS -A- Accredited Investor The SEC designation for an individual or entity meeting any of the following criteria: Any director, executive officer, or general partner of the issuer of the
Activity Sheet 1: What is a Stock? Stocks represent a share of ownership in a publicly held company. Private companies do not issue stock. As a stockholder, the investor has a claim on the assets of the
Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Receivable are the total amounts customers owe your business for goods or services sold
Chapter 3 How Securities are Traded Primary vs. Secondary Security Sales Primary: When firms need to raise capital, they may choose to sell (or float) new securities. These new issues typically are marketed
The Kansai Electric Power Company, Incorporated and Subsidiaries Consolidated Financial Statements for the Years Ended March 31, 2003 and 2002 and for the Six Months Ended September 30, 2003 and 2002 The
NATURE AND SPECIFIC RISKS OF THE MAIN FINANCIAL INSTRUMENTS The present section is intended to communicate to you, in accordance with the Directive, general information on the characteristics of the main
ADVISORSHARES YIELDPRO ETF (NASDAQ Ticker: YPRO) SUMMARY PROSPECTUS November 1, 2015 Before you invest in the AdvisorShares Fund, you may want to review the Fund s prospectus and statement of additional
Chapter 17 Financial Management and Institutions 1 2 3 4 Identify the functions performed by a firm s financial managers. Describe the characteristics and functions of money. Identify the various measures
Summary Prospectus October 30, 2015 Brown Advisory Strategic Bond Fund Class/Ticker: Institutional Shares / (Not Available for Sale) Before you invest, you may want to review the Fund s Prospectus, which
A guide to investing in hybrid securities Before you make an investment decision, it is important to review your financial situation, investment objectives, risk tolerance, time horizon, diversification
Priority Senior Secured Income Fund, Inc. This material is neither an offer to sell nor the solicitation of an offer to buy any security. Such an offer can be made only by prospectus, which has been filed
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. Aston Hill Mutual Funds AMENDMENT NO. 1 DATED OCTOBER 9, 2015 TO THE SIMPLIFIED
CHAPTER OUTLINE Spotlight: J&S Construction Company (http://www.jsconstruction.com) 1 The Lemonade Kids Financial statement (accounting statements) reports of a firm s financial performance and resources,
Overview of Financial Solutions The Etra Advisory Group provides solutions to businesses for growth, expansion, cash flow, refinance and acquisition. We cover the world of business financing that banks
Goals Bonds: Fixed Income Securities History Features and structure Bond ratings Economics 71a: Spring 2007 Mayo chapter 12 Lecture notes 4.3 Bond Returns Two Parts Interest and capital gains Stock comparison:
Chapter 9 Bonds and Their Valuation ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS 9-1 a. A bond is a promissory note issued by a business or a governmental unit. Treasury bonds, sometimes referred to as
January 2013 Diversify Your Portfolio with Senior Loans White Paper INVESTMENT MANAGEMENT For financial professional or qualified institutional investor use only. Not for inspection by, distribution or
CHAPTER 27 Short-Term Financial Planning Chapter Synopsis 27.1 Forecasting Short-Term Financing Needs The first step in short-term financial planning is to forecast the company s future cash flows. This
Public Policy and Innovation: Partnering with Capital Markets through Securitization Antonio Baldaque da Silva November 2007 Agenda 1. Motivation: Innovation and Public Policy 2. Traditional tools 3. Alternatives:
Bonds and preferred stock Investing in fixed income securities Basic definitions Stock: share of ownership Stockholders are the owners of the firm Two types of stock: preferred and common Preferred stock:
NHMFC S HOUSING LOAN RECEIVABLES PURCHASE PROGRAM (HLRPP) Presentation to the 20 TH CREBA National Convention 6-7October, 2011 Marriot Hotel, Manila ITEMS FOR DISCUSSION NHMFC CHARTER AND MANDATE A SHORT
1 A B Money and income Currency The money used in a country euros, dollars, yen, etc. is its currency. Money in notes (banknotes) and coins is called cash. Most money, however, consists of bank deposits:
Robert W. Baird & Co. Incorporated Important Information about Investing in Bonds Baird has prepared this document to help you understand the characteristics and risks associated with bonds and other fixed
UFJ Holdings, Inc. November 25, 2003 For the Six Months Ended September 30, 2003 UFJ Holdings, Inc. today reported the company's consolidated financial results for the six months ended September 30, 2003.
TD ASSET MANAGEMENT USA FUNDS INC. TDAM U.S. Equity Shareholder Yield Fund TDAM U.S. Large Cap Core Equity Fund TDAM Global Equity Shareholder Yield Fund TDAM Global All Cap Fund TDAM U.S. Small-Mid Cap
Chapter 19 Using Securities Markets for Financing and Investing Opportunities McGraw-Hill/Irwin Copyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Nineteen NAME that COMPANY
Robert W. Baird & Co. Incorporated Important Information about Closed-End Funds and Unit Investment Trusts Baird has prepared this document to help you understand the characteristics and risks associated
FINANCIAL SERVICES BOARD COLLECTIVE INVESTMENT SCHEMES INTRODUCTION This booklet will provide you with information on the importance of understanding ways in which Collective Investment Schemes ( CIS )
Accounting Self Study Guide for Staff of Micro Finance Institutions LESSON 2 The Balance Sheet OBJECTIVES The purpose of this lesson is to introduce the Balance Sheet and explain its components: Assets,
Business Studies - Financial Planning and Management Study Notes Financial Planning and Management Study Notes: The Role of Financial Planning: The strategic role of financial management: Organisational
2ASSETS Assets held by life insurers back the companies life, annuity, and health liabilities. Accumulating these assets via the collection of premiums from policyholders and earnings on investments provides
SAMA GENERAL DEPARTMENT OF FINANCE COMPANIES CONTROL Prudential Returns Handbook (Finance Companies) 1. Introduction Submission schedule All licensed finance companies in Saudi Arabia are required to submit
Preparing Financial Statements Understanding financial statements is essential to the success of a small business. They can be used as a roadmap to steer you in the right direction and help you avoid costly
Lecture 10 Debt capital Prof. Maged Attia 11/11/2013 1 2 Entrepreneur and team Idea or opportunity Lectures 1,5 Lectures 2, 3,4 Resources & Financing Lectures 6-10 Other topics: - Exit options - Family
CFS Certified Finance Specialist Syllabus International benchmark in Finance profession Certified Finance Specialist Summary: This award will provide candidates the opportunity to gain advanced level knowledge
Types of Financing Use this section to learn more about business loans and specific financial products that might be right for your company. Revolving Line Of Credit Revolving lines of credit are the most
A Accrued Interest - Interest that has been earned but not yet credited to a bond or other fixed-income investment, such as a certificate of deposit. Active Management The use of professional investment
This document has been translated from the Japanese original for reference purposes only. In the event of discrepancy between this translated document and the Japanese original, the original shall prevail.
Recourse vs. Nonrecourse: Commercial Real Estate Financing Which One is Right for You? Prepared by Bill White Director of Commercial Real Estate Lending In this white paper 1 Commercial real estate lenders