Textbook Notes (362,734)
Canada (158,032)
RSM100Y1 (431)
Chapter 19

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University of Toronto St. George
Rotman Commerce
Stojanovic Dragan

CHAPTER 19 UNDERSTANDING SECURITIES AND INVESTMENTSSECURITIES MARKETSStocks and bonds are known as securities because they represent secured or assetbased claims on the part of the investorsStockholders have claims on some of a corporations assets because each share of stock represents part ownershipBonds represent strictly financial claims for money owed to bondholders by a companyCompanies sell bonds to raise longterm fundsMarkets in which stocks and bonds are sold are called securities markets Primary and Secondary Markets for SecuritiesPrimary Securities Markets the sale and purchase of newly issued stocks and bonds by firms or governmentNew securities are sometimes sold to one buyer or a small group of buyer in private placements the business that use them keep their plans confidential1 Investment BankingMost new stocks and some bonds are sold to the wider public marketInvestment Banker any financial institution that purchases and resells new stocks and bondsThey provide three types of servicesAdvise the company on the timing and financial terms for the new issueBy underwriting buying the new securities investment bankers bear some of the risk of the issuing of the new securityCreate the distribution network that moves the new securities through groups of other banks and brokers into the hands of individual investorsMarket for existing stocks and bonds the secondary securities market is handled by organizations such as the Toronto Stock Exchange STOCKS Common StockStock values are expressed in three different waysas par value as market value and as book value1 Par ValueIs the face value of a share of stock the arbitrary value of a stock set by the issuing companys board of directors and stated on stock certificatesEach company must preserve the par value money in its retained earnings
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