(BQ) Part 2 book "Financial management - Concepts and applications" has contents: Assessing the cost of capital - What return investors require; understanding financing and payout decisions; designing an optimal capital structure; measuring and creating value,. and other contents. | Find more at Part 3 Financing Long-Term Needs Overview of Capital Markets: Long-Term Financing Instruments 9 Learning Objectives There are two times in a man’s life when he should not speculate: when he can’t afford it and when he can. – Mark Twain obj Assess the key features of bonds and credit ratings. obj Earlier in this book, we focused on sizing up a firm’s prospects and understanding the short-term financial requirements of the firm. In particular, Chapter 5 introduced short-term financing instruments with maturities less than one year, traded in what are known as money markets. Then, Chapter 7 presented a bridge between short-term and long-term financing and introduced the underpinnings of the valuation of financial securities such as bonds and stocks. Now, we’ll focus our attention on understanding the longterm financing instruments issued by firms and the markets in which they trade. This chapter is the first of four that examine various aspects of a firm’s financial needs for more than one year, with securities such as bonds and stocks traded in what are known as capital markets. If a firm is not able to meet its financial requirements through internally generated funds and some short-term borrowing, then it must seek external financing through capital markets. Later in the book, we’ll look at the cost of raising capital in Chapter 10, financing and dividend decisions in Chapter 11, and how to determine an appropriate mix of debt and equity in Chapter 12. But first, in this chapter, we examine the distinctive features of three important types of financial instruments that were briefly introduced in Chapter 7: bonds, preferred shares, and common shares. We then present an overview of capital markets, with a general focus on the stock market because it is more complex than the bond market. Later, we focus on the efficiency of stock markets, or the extent to which securities trade at fair prices, as this is an .
