Procedures for long-term financing

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Presentation transcript:

Procedures for long-term financing Chapter 14 Procedures for long-term financing

Introduction External financing has to come from someone and through some mechanism. Someones = individuals and institutions = investors = supplier of funds This chapter introduces you to the basic understanding of financing procedures

Actors and Friction Ideally = buyer ↔ seller Realistically = accountants, attorneys, auditors, investment bankers Actually facilitate exchange Payments made to these facilitators (a cut off the top) = friction Impede motion Heat = legal and regulatory proceedings

Why do we have actors? Users of funds receive money now  promise to pay cash flow in the future Supplier of funds will not enter into such contracts unless they believe they will get paid and the contract is enforceable

Other terms Full disclosure Due diligence

Regulators and Regulation Securities Act of 1933 The primary purpose of the '33 Act is to ensure that buyers of securities receive complete and accurate information before they invest. Require that investors receive financial and other significant information concerning securities being offered for public sale; and Prohibit deceit, misrepresentations, and other fraud in the sale of securities. It is not illegal to sell a bad investment, as long as all the facts are accurately disclosed

Middlemen People aren’t equipped to sell their own securities Ex. Investment bankers, brokers, advisers Prior to the sale of the securities – underwrite them Sign and accept liability, thus guaranteeing payment in case loss or damage occurs.

END CHAPTER STOP BEFORE HANGERS-ON = PAGE 268