Decision Making

In the beginning, there was no real stock market. However stock exchanges did take place in smaller groups and corporations. This all took place during the 1700's where stocks were already around for a long time before that but it wasn't really popular in the United States. Stocks originally started as auctions where traders called out names of companies and the shares available. There was a auction that took place and the shares went to the highest bidders.

Most decisions are made with analysis, but some are judgment calls not susceptible to analysis due to time or information constraints. Please write about a judgment call you’ve made recently that couldn’t be analyzed. It can be a big or small one, but should focus on a business issue. What was the situation, the alternatives you considered and evaluated, and your decision making process? Be sure to explain why you chose the alternative you did relative to others considered.

3. They charged a higher than fair price in the Secondary Market. They sold the issue slowly in order to maintain the premium.

10. Stock options provide the holder with an option to acquire a specified number of shares in a corporation under prescribed conditions and within a stated future time period. Options that are issued as an attachment to other securities are called stock warrants. Warrants may trade separately while options do not. Options often have a limited life while warrants often have no expiry date.

2. When treasury stock is sold for an amount greater than cost, the difference should be

If value is 15% or more, basis must be allocated to the rights but only if rights are exercised or sold. The holding period runs from the date the original stock was acquired.

Since we cannot estimate the amount of future returns in our example, condition #6 is not met. Therefore, sales revenue and cost of sales should be recognized either when the return privilege has substantially expired or if those conditions subsequently are met, whichever occurs first.

If these criteria are met, the entry to record the sale of the stock is the same as if the stock were sold to any investor.

In this case, the issued shares are not mandatorily redeemable, they are conditionally redeemable. Therefore, this provision is not applicable.

c. Pay calls, assessments, and other sums chargeable or accruing against the securities, and sell or exercise stock subscription or conversion rights; and

Stock options and warrants give the holder the right to purchase a share of stock at a predetermined price within a given time period. According to Richard G Schroeder in the textbook Financial Accounting Theory and Analysis: Text and Cases, under current GAAP the cash inflow received from these securities needs to be reported as equity. The value reported in subsequent periods is historical and does not change in response to changes in the market value of these securities.

The rational decision-making model describes a series of steps that decision makers should consider if their goal is to maximize the quality of their outcome. In other words, if you want to make sure that you make the best choice, going through the formal steps of the rational decision-making model may make sense. The following are the steps taken to come to a rational decision: 1. Identify the problem, 2. Establish decision criteria, 3. Weigh decision criteria, 4. Generate alternatives, 5. Evaluate the alternative, 6. Choose the best alternative, 7. Implement the decision, 8. Evaluate the decision.

Normally, the underwriter’s agreement can come in two basic forms: Firm Commitment and Best Efforts. Using a Firm Commitment arrangement the investment bank will acquire all the new shares from the issuing firm and then be responsible to market it to the public. The compensation for the investment bank is the spread between their purchase price and public offering price. Using this method, the investment bank undertakes the full risk of not being able to sell all the shares at the determined price. By the best effort arrangement, the investment bank assists the issuing firm to sell their shares. The investment bank serves as an intermediary between the potential investors and the issuing

underwriters would be confident in success of a deal due to favorable economic conditions and solid

It is a financial institution that helps corporations, governments and individuals in raising financial capital, the could also assit campanies involved in mergers and acquisitions and provide ancillary services like equity securities, market making, and trading of derivatives. This is done by underwriting or acting as the clients’ agent in the issuance of