FIN 3310 Lecture 2: Chapter 2 Class Notes
13 Feb 2017
School
Department
Course
Professor
Document Summary
Quiz 25-30 q: strictly memorization, bus legal entity matrix, ch 1-2, no 10 axioms of finance. T chart: left side investing tas, right side funding tls and tse, find investing first then funding. Fin markets: bringing together barrowers and sellers. Direct transfer of funds: financial middlemen. Commercial bank t chart: left side cash, home, securities, right side deposits. D/e ratio in a bank is 13/1. Taxes are the reason companies use debt not stocks for financing: assuming tax liability. In efficient markets, stock prices are an unbiased estimate of the economic value of an nterprise. Stock prices reflect the prese(cid:374)t value esti(cid:373)ate of a fir(cid:373)"s e(cid:454)pected cash flo(cid:449)s discou(cid:374)ted at a(cid:374) appropriate rate of return. Required ror is determined by: conditions of fin markets, supply of funds, investment demand, seniority of the security, risk of default, marketability of the security.
