Chapter 14: Introduction to
corporate finance
1. Creating value with financing
2. Patterns of corporate financing
Sources of funds (14.2)
In general, companies have 3 main sources of cash
Profits from the past
Selling shares (“equity”)
All kinds of loans and other form of debt
The difference between the cash a company needs, and the plowed back profits is called:
Financial deficit
Types of securities
• Equity
- Common stock
- Preferred stock
• Debt
- Commercial paper (= no collateral)
- Debentures (= bonds)
- Guaranteed notes
- Eurobond
- Sterling notes
- New Zealand dollar notes
- Bank loans
- … Look online for numerous other kinds of debt
, Sources of funds
Going under 0. Why?
They buy back the
shares and buy the loans
Sources of funds – Debt ratio
Patterns of corporate financing
Firms may raise funds from external sources or plowback profits rather than distribute them to
shareholders
Should a firm elect external financing, they may
choose between debt or equity sources
corporate finance
1. Creating value with financing
2. Patterns of corporate financing
Sources of funds (14.2)
In general, companies have 3 main sources of cash
Profits from the past
Selling shares (“equity”)
All kinds of loans and other form of debt
The difference between the cash a company needs, and the plowed back profits is called:
Financial deficit
Types of securities
• Equity
- Common stock
- Preferred stock
• Debt
- Commercial paper (= no collateral)
- Debentures (= bonds)
- Guaranteed notes
- Eurobond
- Sterling notes
- New Zealand dollar notes
- Bank loans
- … Look online for numerous other kinds of debt
, Sources of funds
Going under 0. Why?
They buy back the
shares and buy the loans
Sources of funds – Debt ratio
Patterns of corporate financing
Firms may raise funds from external sources or plowback profits rather than distribute them to
shareholders
Should a firm elect external financing, they may
choose between debt or equity sources
