FINS1613 Lecture 3: FINS Week 3 Lect
Document Summary
Key features of a corporation: it is its own legal entity, distinct from the owners, there is a separation between ownership and management. The firm"s source of financing is called its capital. The capital structure is the ownership structure of a firm. It consists of debt, equity, and other securities that a firm has outstanding. We generally focus on the market value of these securities, the price that investors are willing to pay for the cash flows and legal rights promised by the securities. This differs from both the face value of securities, a notional value used to determine cash flows, and the book value, an accounting figure. Financial instruments that gives investors rights to cash flows from a firm. Securities offered vary in (i) the terms of the cash flows, (ii) the rights of investors to enforce payment, and (iii) the ability of investors to influence firm decision making.
