Jeffrey J.Haas, Corporate Finance, Thomson/West:2004
initial public offering IPO
secondary or follow on offering
prospectus
underwriters
secondary market/primary market
10-K annual report
10-Q quarterly report
8-K current report
pros and cons of going public
pros lower cost of capital/liquidity/exit strategy (cash out)/acquisition currency/control/prestige
cons commitment of management's time/cost/living in a "Glass House"/hostile takeovers/reduced communication with stockholders/focus on short term results
balance sheet
liquidity refers to a company's ability to convert an asset into cash
current asset/long lived asset
current liabilities/longterm liabilities
shereholdrs' euity
1)capital stock at par value2)additional paidin capital, capital surplus3)retained earnings
capital stock 1)authorized2)authorized and issued3)authorized, issued, and outstanding
rate of interest reflects1)anticipated average rate of inflation2)opportunity cost of the loaned money3)credit or default risk of the borrower
prime rate is the rate of interest banks charge their largest and most stable borrowers
rule of 72 take monety to double 8% 9years
1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 =2.0121
1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08=1.999
1.09 1.09 1.09 1.09 1.09 1.09 1.09 1.09 = 1.9925
1.12 1.12 1.12 1.12 1.12 1.12=1.9738
valuing companies
balanced sheet based valuation method
book value total asset - total liabilities
intangible asset
liquidating value
M/B ratio M:market price per share B:book value paer share
P/E ratio P:price per share E:earnings per share
cash based valustion method
dividend discount model
no growth scenario P=D/K
constant growth scenario P=D/(K-g)
discounted cash flow method
capital asset pricing model
