Bu111 Final Review F2020 (ALL PEST FACTORS)

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What are the three pillars of the Canadian Financial System?
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What are the three pillars of the Canadian Financial System?
1. Banks and Alternate Banks
2. Specialized Lending and Insurance Companies
3. Investment Dealers
Why go with an investment dealer?
Possible answer: If you are a larger corporation looking to go public to raise capital.

i.e. Go on the stock exchange
Why stick with a specialized lender? (2-3 reasons)
1. Don't want to release public information
2. Cant afford to lose your money
3. you're a medium sized business
Why stay with a bank/alternate bank?
Everyone goes to banks! it's the easiest and most accessible. So if you're too small to be selling equity, or perhaps you don't have as much funding as you used to.
Debt Financing vs Equity Financing, which is better and in what situation?
As a company, since debt financing requires you to pay interest, its legally binding so its more risk.

With equity financing, you are giving up and thereby diluting ownership, must share profits and control
What are Bonds?
Represents debt for the issuing government or corporation. They are a legally binding agreement with a fixed annual return.
Interpret this bond: PepsiCo 4.6 of 2035 at 94.5
Company borrowing money: Pepsico
Coupon Rate: 4.6%
Face Value: $945
Maturity Date: 15 years
What are stocks? (list 3-5 characteristics)
1. Voting rights
2. No fixed return
3. Variable return
4. Discretionary payment (dividends)
5. Higher risk than a corporations bond from a consumers perspective
Common shares vs preferred shares?
Common shares: guaranteed vote, not first in line for dividends.

Preferred: no vote, first in line for dividends
What part of the Diamond-E would determine if dividends are pushed out?
The managerial preferences/ resources