Financing Alternatives for Corporations

Question 1

INITIAL PUBLIC OFFERING (IPO)

Answer 1

The process in which private companies work with financial institutions to bring their shares to the public in a new stock issuance.

Question 2

CORPORATE BONDS

DEBT OBLIGATION

Answer 2

Bonds in which the issuing company makes a legal commitment to pay interest on the principal and repay principal at the bond’s maturity to the investor (bond buyer).

Question 3

BANK DEBT

Answer 3

Long-term liability a company takes on by borrowing money from their bank to pay for long-term assets or to add working capital to cover current liabilities (expenses).

Question 4

INSOLVENCY

Answer 4

State of financial distress in which a business cannot pay of its debts.

Question 5

INTERNAL VS EXTERNAL FUNDING

Answer 5

Companies can fund their activities with equity/debt/both, but depends on interest rates and risks.