The Stock Market Is Essential For The Financial Industry

Issuing additional debt to finance the company expansion would worsen the company’s debt ratio as it is already more than average. The company envisions to be profitable by raising capital from existing stockholders by issuing common stock through rights offering.

This step involves short and long term debt equity analysis. The proportion of equity capital depends on the possessing and additional funds will be raised. The choice of the source of funds the company has are the issue of shares and debentures, loans to be taken from banks and financial institutions and public deposits to be drawn in form of bonds. The choice will depend on relative merits and demerits of each source and period of financing. The management of the investment funds is key in allocating that the funds are going in the correct place. The profits that are made can be down in two ways dividend declaration which includes identifying the rate of dividends and retained profits in which the volume has to be decided which will depend upon expansion and diversification of the company. The management of cash is another important function. Cash is needed for all different aspects of the company such as payment of salaries, overhead and bills. All of these are important in a company and how successful the financial aspect is going to be.The financial management practices include capital structure decision, investment appraisal techniques, dividend policy, working capital management and financial performance assessment. A company needs to have well financial in order to be successful. “A company that sells well but has poor financial management can fail.” (Johnston)

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.

Operating cash flow was not enough to cover capital investments (this firm does not to appear to pay dividends as it does not show in the prior 3 years). The firm is financing it operations from the issuance of common stock. $23,082 was raised during the period, which is covering its investments in capital expenditures.

replacing some of the existing equity by issuing more debt will increase the value of the firm. If

“When a company issues additional shares, this reduces an existing investor’s promotional ownership in that company” (Diluted Earnings Per Share - Diluted EPS. (2015)) This means that in the case were we found the earnings per share of a company to have decreased as new capital was raised; it led to the investor’s share to have decreased as well, because now, instead of having say 10% of ownership in a company; but because more shares are added so that the company can raise capital, the ownership decreases (unless the investor buys all the additional shares) to say 5%.

Does the Economy Ruin the Stock Market or Does the Stock Market Ruin the Economy

In the late October of 1929, the United States Stock Market took an immense plummet. This plummet acted as a catalyst to the beginning of the 10 year long Great Depression. It was known as Black Tuesday, aka the Wall Street Crash of 1929. (Harold)

Shares outstanding decrease as the firm takes on more debt. The reason being is that the firm buys back shares with the newly acquired cash from issuing debt.

The second method to distribute extra cash is through a share repurchase. Share repurchase means a company buys its shares back from the market or from those shareholders who are willing to tender such shares. The buyback methodology is used primarily when companies such as Ford believe that their share price is undervalued. Buying back its stock will help Ford to increase its share price by promoting greater interest in its stock. However, we cannot effectively increase company’s liquidity through a conventional share repurchase. And also for traditional stock buyback, it usually will take years of time to executive. In Ford case, stock buyback option will put Ford’s family’s voting power in the company at risk.

The dividends that stockholders receive and the value of their stock shares depend on the business’s profit performance. Managers’ jobs depend on living up to the business’s profit goals.

An opportunity for creating more equity is by attracting another company to do business with them. Innobus can also issue more shares and apply for an extra bank loan (which they already do).

Also, the stock market tends to react negatively to announcements of new common stock offerings, whereas debt security announcement tend to have little impact on stock prices. As a additional external financing is needed, the firm will work down the pecking order – from safe to more risky debt, then possibly to convertible debt, and finally to common equity as a last resort.

Liquidity is a vital part of any security market. Liquidity expense is commonly incorporated with the cost of a security. Higher liquidity inferred lower holding cost for the bond. Illiquidity suggests that the investor will bring about higher expense for holding the stock of the said bond. Market liquidity is influenced by various patterned, auxiliary, and approach related components. Leven however liquidity estimation is a troublesome errand and subject to discuss yet liquidity in government security markets is of enthusiasm to policymakers on account of the a wide range of capacities these business sectors perform inside of the budgetary framework. Fluid security market gives the administrations less expensive financing choices. A genuine fluid business sector will draw out the effective cost of Government securities (yield) which are generally used to cost and to fence different sorts of securities. For proficient clearing and settlement frameworks to perform their sought part, these securities are acknowledged as insurance for different money related exchanges and as a souring so as to wellspring of liquidity to cover startling occasions liquidity utilizing these advantages. An illiquid security business sector will have low transmission instrument for usage of financial arrangement. Fluid markets require littler liquidity premium to hold resources and the same helps government with lower financing cost alternatives. Value contortion in fluid markets is insignificant

Nevertheless if companies operate in weak markets and fail to create growth and profit the concept of maximization of shareholder wealth is also an opportunity for self-regulation and security against threats for a company. This approach is in particular useful for safeguarding against difficulties arising from wrong or misguided leadership within a corporation. Shareholders of a company have the strongest interest in a company’s success because they often invest a lot of capital in the business and require revenues for their deposit (Moore, 2002). As a matter of fact, they become more