Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 5: Q6DQ (page 493)

Discuss the benefits accruing to a company that is traded in the public securities markets.

Short Answer

Expert verified

A publicly-traded company can develop new products and acquire assets by gathering funds from security markets.

Step by step solution

01

Securities market

Securities market is a place where financial instruments are traded. It includes the sale and purchase of debts such as bonds and equity such as stocks

02

Benefits of trading publicly

A company can enjoy the following benefits of trading publicly:

  • A company can raise funds quickly and can improve its cash flow.
  • The capital raised by the company helps it to reduce itsdebts.
  • The collection of funds facilitates companies to grow and expand their operations.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

The Presley Corporation is about to go public. It currently has after-tax earnings of \(7,200,000, and 2,100,000 shares are owned by the present stockholders (the Presley family). The new public issue will represent 800,000 new shares. The new shares will be priced to the public at \)25 per share, with a 5 percent spread on the offering price. There will also be $260,000 in out-of-pocket costs to the corporation.

c. Compute the earnings per share immediately after the stock issue.


What act of Congress created the Securities and Exchange Commission?

What method of “bond repayment” reduces debt and increases the amount of common stock outstanding? (LO16-3)

Midland Corporation has a net income of \(19 million and 4 million shares outstanding. Its common stock is currently selling for \)48 per share. Midland plans to sell common stock to set up a major new production facility with a net cost of \(21,120,000. The production facility will not produce a profit for one year, and then it is expected to earn a 13 percent return on the investment. Stanley Morgan and Co., an investment banking firm, plans to sell the issue to the public for \)44 per share with a spread of 4 percent.

b. Why is the investment banker selling the stock at less than its current market price?

Discuss how an underwriting syndicate decreases risk for each underwriter and at the same time facilitates the distribution process.

See all solutions

Recommended explanations on Business Studies Textbooks

Business Case Studies

Read Explanation

Nature of Business

Read Explanation

Corporate Finance

Read Explanation

Business Operations

Read Explanation

Organizational Communication

Read Explanation

Introduction to Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free