tailieunhanh - Ebook Financial management and policy (2nd edition): Part 2

(BQ) Part 2 book "Financial management and policy" has contents: Obtaining long term funds externally, preferred stock and com mon stock, convertible securities and warrants, working capital management, management of accounts receivable, inventory management,.and other contents. | Obtaining Long-Term Funds Externally In Part III, the focus of our analysis was primarily on the theoretical aspects o f long-term financing—both external and internal. By and large, methods of financing were categorized broadly into the equity and non­ equity portions of the capital structure of the firm. In this part, we explore in detail the specific methods of external long-term financing. We are concerned with the way a firm employs these various methods, their features, various valuation concepts, and, when appropriate, the integration of certain aspects of a method into the theory discussed previously. Because the financing methods taken up are long-term, this part logically follows the theoretical discussion of the capital structure of the firm in Part III. We defer discussion of the methods of short- and intermediate-term financing until we have taken up working-capital management in Part V. 291 INTRODUCTION The raising o f funds externally automatically involves the firm in the money and capital markets. Because conditions in these markets affect the cost and availability of alternative methods of financing, ob­ viously the financing decision is affected. By virtue of their interde­ pendence with this decision, the investment and dividend decisions are affected as well. Consequently, it is very important that the financial manager keep abreast of financial market conditions. The more frequent the need of the firm to finance externally, of course, the closer the at­ tention that he will need to pay. Extensive evaluation of interest rates and equity returns in financial markets is beyond the scope of this book; however, such an analysis is available in a supplementary volume .1 When a business firm finances its investment in real assets externally, it ultimately obtains funds from savings-surplus economic units in the economy. A savings-surplus unit can be either a business, a household, or a government whose current savings (current income less .