Our text states “Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk.”...
Our text states “Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk.” For a Fortune 500-sized company provide 3 specific examples of how that reducing and reallocating could take place.
Homework Answers
For a Fortune 500 company, the reduction and reallocation of
risks through financial markets happen in the following
manner:
a) The company can issue multiple tranche of bonds through the
financial market and this would enable the company to reduce cost
of borrowing and associated risk as compared to taking loan from
single entity.
b) The company can also invest in multiple stocks and bonds through
the financial market to ensure optimal utilization of it's surplus
funds. This is a more efficient utilization and reduces risk for
the business.
c) The market helps in determination of the fair value of equity
and the share price which indicates the implied cost of equity and
thus provide the company with a fair value of cost of eqauity
capital than would be possible if shares were issued through
private placement alone.
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presence in niche markets. Columbia retains existing management and
local business practices but provides centralized services, such as
finance, accounting, insurance, and corporate-level management.
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“Jessica, like her predecessors, spent most of her time with
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Background
Columbia invests in family-owned businesses with a strong
presence in niche markets. Columbia retains existing management and
local business practices but provides centralized services, such as
finance, accounting, insurance, and corporate-level management.
Patterson has remained profitable since the acquisition, but its
return on investment has been declining.
Your first stop at the Patterson complex is a meeting with the
controller. He provides some additional background:
“Jessica, like her predecessors, spent most of her time with
customers developing...
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