BUSI 3405U Lecture Notes - Lecture 1: Seasoned Equity Offering, Credit Union, Initial Public Offering
Document Summary
Tangible things (residential stuctures ppe), intangible things (patents, underestimated on balance sheet) Consumer items plus real investments to product goods. Household goods: major interest: the consumer personal finance: predominantly lends. Business sector: intermediate producer: real investment - business finance: predominantly borrows. Government sector: public goods government finance: predominantly borrows. Financial asset a security under which funds are lent; a claim". Debt contractual obligations where rights are determined under contract law. Equity: ownership claim on residual income of an enterprise rights determined under securities and corporate law. Finance is based on: law, accounting and economics. Intermediaries help borrowers find suitable lenders lenders non market transactions borrowers (direct claim) lenders market intermediaries borrowers (direct claims) Lenders financial intermediaries borrowers (indirect claims) Problems with direct non-market intermediation: 1) search costs,2) double coincidence of wants, Asymmetric information the seller knows more than the buyer. Adverse selection information asymmetry before the transaction occurs: some borrowers are crooks.
