UB MGF 401 - chap013 (15 pages)

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chap013



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chap013

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Pages:
15
School:
University at Buffalo, The State University of New York
Course:
Mgf 401 - Financial Institutions

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13 1 Types of Securities Equity Common stock Preferred stock Debt Commercial paper Debentures bonds Notes loans Bank financing line of credit term loan Hybrid Convertible McGraw Hill Irwin Debt Copyright 2007 by The McGraw Hill Companies Inc All rights 13 2 Common Stock Authorized Stock Number of shares of common stock that can be issued by the company Issued Shares Shares that have been issued by the company Outstanding Shares Shares that have been issued by the company and are currently held by investors Note treasury stock is shares that were issued and repurchased McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 13 3 Common Stock Authorized Shares Maximum number of shares that the company is permitted to issue as specified in the firm s articles of incorporation Par Value Issuance of Shares Value of security shown on certificate Note may be none Requires approval of board of directors and shareholders McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 13 4 Common Stock Book Value of Equity Par value Capital paid in excess of par Retained Earnings Treasury Stock Book Value vs Market Value Book value is a backward looking measure It tells us how much capital the firm has raised from shareholders in the past The market value of the firm is forward looking it depends on the future value that shareholders expect to receive McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 13 5 Common Stock Example H J Heinz Book Value vs Market Value 4 2004 Total Shares outstanding 352 million Common Shares 25 par 108 Additional paid in capital 403 Retained earnings 4 857 Treasury shares at cost 2 928 Other 546 Net common equity Book Value 1 894 McGraw Hill Irwin Copyright 2007 by The McGraw Hill Companies Inc All rights 13 6 Common Stock Example H J Heinz Book Value vs Market Value 4 2004 Total Shares outstanding 352 million April 2004 Market price 38 sh of shares x 352 Market Value 13 376 billion



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