Study Guides (238,076)
Canada (114,909)
Commerce (395)
COMM 308 (11)
All (4)

Introduction to Corporate Finance.docx

37 Pages
Unlock Document

Concordia University
COMM 308

Introduction to Corporate FinanceComm 308CHAPTER 112 THE FINANCIAL SYSTEMHousehold sectorsPrimary provider of funds to businesses governmentinvestment abroad Financial intermediaries Entities that invest funds on behalf of others ad change the nature of transactions Transform the nature of the securities they issue and invest inMarket intermediaries Entities that facilitate the working of markets and help provide direct intermediation but do not change the nature of transactions also called brokers Responsibilitiesassist to the transaction and bring borrowers and lenders togetherIntermediation Transfer of funds from lenders to borrowers Direct Claims Lender provides money to borrowers directly without any specialist helpIndirect Claims Leader who first loaned money to bank institution provides money to borrowers Principal TransactionsNonMarket Transaction lenders to borrowersMarket Intermediaries Entity that facilitates the help of the lender to provide the borrower Financial Intermediaries Financial institution lends money to the ultimate borrower but raises the money itself by borrowing directly from other individuals Direct claim with financial institution indirect claim on borrowerMarket SegmentRetail Market intermediaries help individualsInstitutional intermediaries help financial intermediariesCredit Crunch A situation in which the financial intermediaries have to raise the cost of their loans by a significant amount due to their own inability to raise financing on reasonable terms The intermediariesBanksacted as deposit takers and lenders Insurance companiespeople pay premium on monthly basis to insurance and when you die they pay offPension PlansCaisse de Dpot du Quebec CPP etc Mutual funds 1 pool small sums of money to make investment that would not be possible for smaller investors 2 offer professional expertise in fund management The BorrowersCrown corporationsgovernmentowned companies that provide goods and services needed by Canadians 13 FINANCIAL INSTRUMENT AND MARKETSFinancial Securities1Debt instruments legal obligations to repay borrowed funds at a specified maturity date and to provide interim interest paymentiBank loansiiCommercial papersiiiBankers acceptances BAsivTreasury billsvMortgage loansviBonds2Equity instruments ownership stake in a companyiCommon share No obligations voting rightiiPreferred share Obligations of fixed dividend paymentsFinancial Instrument1NonMarketable financial assets Invested funds that are available on demand in instruments that are not tradable you cannot sell them2Marketable financial assets Can be traded among market participants categorized by their term to marturityaMoney market securities Shortterm less than 1 year TBills BAs etc bCapital market securities Long Term More than 1 year bonds debentures etcFinancial MarketPrimary Market Involves the issue of new securities by the borrower in return for cash from investors or lendersSecondary Market Trading environments that permit investors to buy and sell existing securitiesaExchanges or auction markets Involves a bidding process that takes place in a specific locationbDealer or overthecounter markets No specific location consist of a network of dealers who trade directly with one another Toronto Stock Exchange TSX The major stock exchange in Canada where most equity security transactions take place it is the official exchange for trading Canadian senior securitiesTSX Venture Exchange The stock exchange for trading the securities of emerging companies not listed on the TSX TSX Market The group that performs trading operations for the TSX and the TSX VETMX Group Inc The company who owns the TSX TSX VEMEMarket Capitalization The total market value of the securities for an entityThird Market The trading of securities that are listed on organized exchanges in the OTC marketFourth Market The trading of securities directly between investors without the involvement of brokers or dealers 14 THE GLOBAL FINANCIAL COMMUNITYNYSE New York Stock Exchange Largest in the worldNasdaq Second largest in the US third largest in the world
More Less

Related notes for COMM 308

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.