Essay on Corporate Finance Review Outline

909 Words Feb 15th, 2016 4 Pages
Session 1 - Chapter 13 * What is the definition of capital market efficiency?
An efficient capital market (EMH) is one in which stock prices fully reflect available information (i.e. stock market prices are good estimates of underlying intrinsic value).

* What conditions generally lead to market efficiency? * Rationality * Independent Deviations * Arbitrage * What are the three forms of market efficiency? * Weak form * Security prices reflect all information found in past prices and volume. * Implication? * Semi-strong form * Security prices reflect all publicly available information. * Strong form * Security
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* The operating cycle is the time period from inventory purchase until the receipt of cash (the operating cycle may not include the time from placement of the order until arrival of the stock). * The cash cycle is the time period from when cash is paid out to when cash is received. * Net Income is the bottom line * Short-term financing policies * Flexible (i.e., conservative) policy: high levels of current assets relative to sales and relatively more long-term financing. * Restrictive (i.e., aggressive) policy: low levels of current assets relative to sales and relatively more short-term financing * What should be considered in setting a firm’s short-term financial policy? * Cash reserves * Maturity hedging * Relative interest rates * What are the options for short-term financing? What are the pros and cons of the various short-term financing policies? * 1. Unsecured Loans * 2. Secured Loans * 3. Commercial Paper

Session 3 – Chapter 19 Raising Capital from the Public * What are the basic methods of raising capital? * What are the basic procedures in a new public security issue? * What is a general cash offer (IPO and seasoned new issues)? Why go public? What are the basic

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