BA 101

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  1. debt financing
    the act of borrowing funds
  2. capital
    long-term funds
  3. collateral
    assets of the borrower that are transferred to the lender if the borrower defaults on the loan
  4. prime rate
    the rate of interest typically charged on loans to the most creditworthy firms that borrow
  5. bonds
    long-term debt securities (IOU's) purchased by investors
  6. par value
    the amount that bondholders receive at maturity
  7. indenture
    a legal document that explains the firm's obligations to bondholders
  8. secured bonds
    bonds backed by collateral
  9. unsecured bonds
    bonds that are not backed by collateral
  10. call feature
    provides the issuing firm with the right to repurchase its bonds before maturity
  11. protective covenants
    restriction imposed on specific financial policies of a firm that has issued bonds
  12. commercial paper
    a short-term debt security normally issued by firms in good financial condition
  13. commercial banks
    financial institutions that obtain deposits from individuals and use the funds primarily to provided business loans
  14. savings institutions
    financial institutions that obtain deposits from individuals and use the deposited funds primarily to provide mortgage loans
  15. finance companies
    financial institutions that typically obtain funds by issuing debt securities (IOU's) and lend most of their funds to firms
  16. pension funds
    receive employee and firm contributions toward pensions and invest the proceeds for the employees until the funds are needed
  17. insurance companies
    receive insurance premiums from selling insurance to customers and invest the proceeds until the funds are needed to pay insurance claims
  18. mutual funds
    investment companies that receive funds from individual investors and then pool and invest those funds in securities
  19. bond mutual funds
    investment companies that invest the funds received from investors in bonds
  20. equity financing
    the act of receiving investment from owners (by issuing stock or retaining earnings)
  21. divided policy
    the decision regarding how much of the firm's quarterly earnings should be retained (reinvested in the firm) versus distributed as dividends to owners
  22. common stock
    a security that represents partial ownership of a particular firm
  23. preferred stock
    a security that represents partial ownership of a particular firm and offers specific priorities over common stock
  24. venture capital firm
    a firm composed of individuals who invest in small businesses
  25. initial public offering (IPO)
    the first issue of stock to the public
  26. stock mutual funds
    investment companies that invest funds received from individual investors in stocks
  27. secondary market
    a market where existing securities can be traded among investors
  28. public offering
    the selling of securities to the public
  29. underwritten
    the investment bank guarantees a price to the issuing firm, no matter what price the securities are sold for
  30. best-efforts basis
    the investment bank does not guarantee a price to the firm issuing securities
  31. underwriting syndicate
    a group of investment banks that share the obligations of underwriting securities
  32. prospectus
    a document that discloses relevant financial information about securities and about the firm issuing them
  33. flotation costs
    costs of issuing securities; include fees paid to investment banks for their advice and efforts to sell the securities, printing expenses, and registration fees
  34. private placement
    the selling of securities to one or a few investors
  35. leasing
    renting assets for a specified period of time
  36. capital structure
    the amount of debt versus equity financing
  37. extension
    provides additional time for a firm to generate the necessary cash to cover its payments to tis creditors
  38. composition
    specifies that a firm will provide its creditors with a portion of what they are owed
  39. private liquidation
    creditors may informally request that a failing firm liquidate (sell) its assets and distribute the funds received from liquidation to them
  40. liquidation value
    the amount of funds that would be received as a result of the liquidation of a firm
Card Set:
BA 101
2013-11-24 23:00:34
Chapt 16

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