WGU C214 Financial Management 2023-2024
Updated Version
T1 Primary financial markets - {Definition}- the markets in which securities
(stocks and bonds) are first issued. This is where the issuers (the firms) and the
buyers (the investors) will engage in an exchange.
T1 Syndicate - {Definition}- When a company wants to issue stock, bonds, or
other publicly traded securities, it hires an * underwriter * to manage what is
often a long and complex process.
After determining the offering structure, the underwriter usually assembles what
is called a syndicate to get help manage the minutiae (and risk) of large offerings.
A syndicate is a group of investment banks and brokerage firms that commit to sell
a certain percentage of the offering.
A group of intermediaries that is used to oversee the issuance of stocks and
bonds. Syndicates are generally made up of large investment banks or other types
of institutional investors.
Competitive sale - {Definition}- those wishing to underwrite the bond issue will
submit bids (on the bond's prices and interest rate) to the issuing firm. The firm
will then select the underwriter that offered the highest price and lowest interest
rate. The underwriter will then sell the bonds to various investors at (hopefully) a
slightly higher price than that at which the bonds were purchased
,Negotiated sale - {Definition}- is the process of underwriters submitting
proposals including bids. *involves a more thorough interview process with the
underwriters.* The issuing firm will carefully select the management team that
will place these bonds.
Secondary Financial Markets - {Definition}- Where securities after they are sold
for the first time are traded.
Auction Market - {Definition}- A market with a physical location and prices are
set by the investors willingness to pay. (New york Stock Exchange)
Dealer Market - {Definition}- *No physical location* made up of multiple
dealers who take inventory of stocks and prices (NASDAQ)
The bid Ask spread - {Definition}- the difference between the bid price and the
ask price
Limit orders - {Definition}- orders that are price contingent - orders are only
executed if the value of the market reaches the price of the limit.
Market Orders - {Definition}- Orders that are time contingent - First come first
serve
Friedmans three roles of prices. - {Definition}- 1. Prices convey information to
consumers.
2. prices affect incentives
3. prices affect the distribution of income
, Price Efficiency - {Definition}- whether prices fully reflect all of the available
information about a particular security
Dollar Returns - {Definition}- calculated by taking the difference between the
price of the security during the previous time period and the price of the security
at the current time period, plus any additional cash flow that came from the
security
Percentage Returns - {Definition}- Percentage returns are calculated by simply
dividing the dollar returns by the price of the security at time t-1, or the previous
time period.
Agency Cost - {Definition}- costs that are incurred when management does not
act in the best interests of shareholders
2 issues that effect *profit maximization* - {Definition}- 1. Agency Costs
2. Potential effect of focusing solely on profits (Ethics)
Cash Flow Statement - {Definition}- Cash flows from *operations, investing and
financing activities*
Cash accounting - {Definition}- counts cash out as expense and cash in as
revenue
Accrual accounting - {Definition}- Revenue is recognized when the earnings
process is complete.
Updated Version
T1 Primary financial markets - {Definition}- the markets in which securities
(stocks and bonds) are first issued. This is where the issuers (the firms) and the
buyers (the investors) will engage in an exchange.
T1 Syndicate - {Definition}- When a company wants to issue stock, bonds, or
other publicly traded securities, it hires an * underwriter * to manage what is
often a long and complex process.
After determining the offering structure, the underwriter usually assembles what
is called a syndicate to get help manage the minutiae (and risk) of large offerings.
A syndicate is a group of investment banks and brokerage firms that commit to sell
a certain percentage of the offering.
A group of intermediaries that is used to oversee the issuance of stocks and
bonds. Syndicates are generally made up of large investment banks or other types
of institutional investors.
Competitive sale - {Definition}- those wishing to underwrite the bond issue will
submit bids (on the bond's prices and interest rate) to the issuing firm. The firm
will then select the underwriter that offered the highest price and lowest interest
rate. The underwriter will then sell the bonds to various investors at (hopefully) a
slightly higher price than that at which the bonds were purchased
,Negotiated sale - {Definition}- is the process of underwriters submitting
proposals including bids. *involves a more thorough interview process with the
underwriters.* The issuing firm will carefully select the management team that
will place these bonds.
Secondary Financial Markets - {Definition}- Where securities after they are sold
for the first time are traded.
Auction Market - {Definition}- A market with a physical location and prices are
set by the investors willingness to pay. (New york Stock Exchange)
Dealer Market - {Definition}- *No physical location* made up of multiple
dealers who take inventory of stocks and prices (NASDAQ)
The bid Ask spread - {Definition}- the difference between the bid price and the
ask price
Limit orders - {Definition}- orders that are price contingent - orders are only
executed if the value of the market reaches the price of the limit.
Market Orders - {Definition}- Orders that are time contingent - First come first
serve
Friedmans three roles of prices. - {Definition}- 1. Prices convey information to
consumers.
2. prices affect incentives
3. prices affect the distribution of income
, Price Efficiency - {Definition}- whether prices fully reflect all of the available
information about a particular security
Dollar Returns - {Definition}- calculated by taking the difference between the
price of the security during the previous time period and the price of the security
at the current time period, plus any additional cash flow that came from the
security
Percentage Returns - {Definition}- Percentage returns are calculated by simply
dividing the dollar returns by the price of the security at time t-1, or the previous
time period.
Agency Cost - {Definition}- costs that are incurred when management does not
act in the best interests of shareholders
2 issues that effect *profit maximization* - {Definition}- 1. Agency Costs
2. Potential effect of focusing solely on profits (Ethics)
Cash Flow Statement - {Definition}- Cash flows from *operations, investing and
financing activities*
Cash accounting - {Definition}- counts cash out as expense and cash in as
revenue
Accrual accounting - {Definition}- Revenue is recognized when the earnings
process is complete.
