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4. Underwriter Market Maker The Role of an Advisor Agency The Role of Investment Banks in Financing Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_section_110&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=di rect&utm_source=boundless

5. Security issuers want to mitigate the risk of having an unsuccessful issue. Underwriters will buy the securities from the issuer and then sell it on the market. The underwriter aims to buy the securities below market price, and then sell them for a profit. Underwriters deal with both companies and government. The issuer could issue stocks, bonds, or any other type of security. Underwriter Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/the-role-of-investment- banks-in-financing-110/underwriter-465- 7544?campaign_content=book_192_section_110&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boun dless NYSE View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing

6. Without sufficient liquidity, markets would become more inefficient because there may not be a buyer/seller to transact with, even at what should be the market price. Market-designated market makers provide liquidity by submitting both bids and asks on certain securities. This helps ensure transactions can occur at the market price. By submitting bids below ask prices, the market maker can make money. The difference between the highest bid and the lowest ask price is called the bid- ask spread. Market Maker Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/the-role-of-investment- banks-in-financing-110/market-maker-466- 3811?campaign_content=book_192_section_110&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boun dless New York Spot Prices View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing

7. Mergers and acquisitions (M&A) require an investment bank to bring the buyer and seller together and to help negotiate the deal. The advisor is hired by the client company to find a buyer/seller. The advisor pitches the deal to potential buyers/sellers using a pitch book, which contains all relevant financial information. The advisor also helps facilitate the deal which is incredible context because it must account for everything from financial projections to assets to brand names. The Role of an Advisor Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/the-role-of-investment- banks-in-financing-110/the-role-of-an-advisor-467- 3812?campaign_content=book_192_section_110&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boun dless Pricewaterhouse Cooper View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing

8. Many small and private companies cannot access traditional financial markets for capital, so they need to either take on debt or find other sources of financing. Investment banks help them find those other sources of capital. Common sources of financing are equity financing, mezzanine financing, and specialist financing (e.g., government loans). The investment banks match their clients to investors and then charge a fee for the service. Agency Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/obtaining-capital-methods-of-long-term-financing-14/the-role-of-investment- banks-in-financing-110/agency-468- 3813?campaign_content=book_192_section_110&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boun dless View on Boundless.com Obtaining Capital: Methods of Long-Term Financing > The Role of Investment Banks in Financing

9. Free to share, print, make copies and changes. Get yours at www.boundless.com Appendix

10. Key terms ask The submitted price at which the trader is willing to sell. bid The submitted price at which the trader is willing to buy. bid price the amount offered by a buyer bid-ask spread the difference between the prices quoted for an immediate sale and an immediate purchase issuer The firm or government selling the security. liquidity Availability of cash over short term: ability to service short-term debt. M&A Mergers and acquisitions (M&A) are aspects of corporate strategy, corporate finance, and management dealing with the buying, selling, dividing, and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. private A company that is not publicly traded. security proof of ownership of stocks, bonds, or other investment instruments.W Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing

11. New York Spot Prices The highest price someone is willing to pay (bid) for gold is $742.30 and the lowest someone is willing to accept (ask) is $743.30. There is a bid-ask spread of $1.10. Free to share, print, make copies and changes. Get yours at www.boundless.com http://www.xdr.com/dash/blog/index.php?m=10&y=08. "Dave's Blog." CC BY http://www.xdr.com/dash/blog/index.php?m=10&y=08 View on Boundless.comCC BYhttp://www.xdr.com/dash/blog/index.php?m=10&y=08View on Boundless.com Obtaining Capital: Methods of Long-Term Financing

12. Pricewaterhouse Cooper Pricewaterhouse Cooper got it's name after the 1998 merger of Price Waterhouse and Coopers & Lybrand. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "PricewaterhouseCoopers." GNU FDL http://en.wikipedia.org/wiki/PricewaterhouseCoopers View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/PricewaterhouseCoopersView on Boundless.com Obtaining Capital: Methods of Long-Term Financing

13. NYSE Firms may issue an IPO on an exchange such as the New York Stock Exchange (NYSE). They sell their stock in exchange for cash. Free to share, print, make copies and changes. Get yours at www.boundless.com Fotopedia. "New York Stock Exchange by in Stock market on Fotopedia - Images for Humanity." CC BY http://www.fotopedia.com/items/flickr-422215562 View on Boundless.comCC BYhttp://www.fotopedia.com/items/flickr-422215562View on Boundless.com Obtaining Capital: Methods of Long-Term Financing

14. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following statements describe the role of underwriters? A) The underwriter minimizes the risk to company that is issuing stock. B) The underwriter sells a company's IPO shares to the market at large. C) The underwriter determines at what price a company's IPO shares will sell. D) All of these answers.

15. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following statements describe the role of underwriters? A) The underwriter minimizes the risk to company that is issuing stock. B) The underwriter sells a company's IPO shares to the market at large. C) The underwriter determines at what price a company's IPO shares will sell. D) All of these answers.

16. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following defines the role of a market maker? A) Market makers purchase securities where the bid-ask spread is too great. B) Market makers are exchanges, like the New York Stock Exchange. C) Market makers quote both ask and bid prices for certain securities. D) All of these answers.

17. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following defines the role of a market maker? A) Market makers purchase securities where the bid-ask spread is too great. B) Market makers are exchanges, like the New York Stock Exchange. C) Market makers quote both ask and bid prices for certain securities. D) All of these answers.

18. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing What are some of the tasks investment banks undertake when they advise companies? A) Prepare the company's pitch book. B) Find companies that might be interested in acquiring the business. C) All of these answers. D) Negotiate the terms of the acquisition between the acquiring and acquired business.

19. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing What are some of the tasks investment banks undertake when they advise companies? A) Prepare the company's pitch book. B) Find companies that might be interested in acquiring the business. C) All of these answers. D) Negotiate the terms of the acquisition between the acquiring and acquired business.

20. Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing Which of the following statements correctly defines a source of capital? A) Mezzanine capital are government loans or special grants that the company qualifies for. B) Specialist financing is subordinated debt or preferred equity instrument that represents a claim on company assets. C) Equity financing occurs when a company sells some of its stock to investors. D) All of these answers.

21. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Obtaining Capital: Methods of Long-Term Financing Which of the following statements correctly defines a source of capital? A) Mezzanine capital are government loans or special grants that the company qualifies for. B) Specialist financing is subordinated debt or preferred equity instrument that represents a claim on company assets. C) Equity financing occurs when a company sells some of its stock to investors. D) All of these answers.

22. Attribution Wikibooks. "Trading." CC BY-SA 3.0 http://en.wikibooks.org/wiki/TradingCC BY-SA 3.0http://en.wikibooks.org/wiki/Trading Parmendian. "Capital Asset Management becomes market-maker of Inecobank's securities - PanARMENIAN.Net." CC BY http://www.panarmenian.net/eng/economy/news/32362/CC BY http://www.panarmenian.net/eng/economy/news/32362/ Wikipedia. "Market maker." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Market_makerCC BY-SA 3.0http://en.wikipedia.org/wiki/Market_maker Wikipedia. "Bid-ask spread." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bid-ask_spreadCC BY-SA 3.0http://en.wikipedia.org/wiki/Bid-ask_spread Wiktionary. "bid price." CC BY-SA 3.0 http://en.wiktionary.org/wiki/bid+priceCC BY-SA 3.0http://en.wiktionary.org/wiki/bid+price Wiktionary. "liquidity." CC BY-SA 3.0 http://en.wiktionary.org/wiki/liquidityCC BY-SA 3.0http://en.wiktionary.org/wiki/liquidity Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//finance/definition/askCC BY-SA 3.0http://www.boundless.com//finance/definition/ask Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//finance/definition/bidCC BY-SA 3.0http://www.boundless.com//finance/definition/bid Wikipedia. "M&A." CC BY-SA 3.0 http://en.wikipedia.org/wiki/M&ACC BY-SA 3.0http://en.wikipedia.org/wiki/M&A Wikipedia. "M&A." CC BY-SA 3.0 http://en.wikipedia.org/wiki/M%2526A#Specialist_M.26A_advisory_firmsCC BY-SA 3.0http://en.wikipedia.org/wiki/M%2526A#Specialist_M.26A_advisory_firms Wikipedia. "Investment banking." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Investment_bankingCC BY-SA 3.0http://en.wikipedia.org/wiki/Investment_banking Wikipedia. "PricewaterhouseCoopers." CC BY-SA 3.0 http://en.wikipedia.org/wiki/PricewaterhouseCoopersCC BY-SA 3.0http://en.wikipedia.org/wiki/PricewaterhouseCoopers Wikipedia. "Mezzanine finance." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Mezzanine_financeCC BY-SA 3.0http://en.wikipedia.org/wiki/Mezzanine_finance Wikipedia. "Private placement agent." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Private_placement_agentCC BY-SA 3.0http://en.wikipedia.org/wiki/Private_placement_agent Blog. "Equity finance - Publicly traded companies - Blog.hr." CC BY-SA http://hughduke9309655.blog.hr/2012/04/1630473371/equity-finance.htmlCC BY-SA http://hughduke9309655.blog.hr/2012/04/1630473371/equity-finance.html Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//finance/definition/privateCC BY-SA 3.0http://www.boundless.com//finance/definition/private Wikipedia. "Initial public offering." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Initial_public_offeringCC BY-SA 3.0http://en.wikipedia.org/wiki/Initial_public_offering Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing

23. Wikipedia. "Underwriter." CC BY-SA 3.0 http://en.wikipedia.org/wiki/UnderwriterCC BY-SA 3.0http://en.wikipedia.org/wiki/Underwriter Wiktionary. "security." CC BY-SA 3.0 http://en.wiktionary.org/wiki/securityCC BY-SA 3.0http://en.wiktionary.org/wiki/security Wiktionary. "issuer." CC BY-SA 3.0 http://en.wiktionary.org/wiki/issuerCC BY-SA 3.0http://en.wiktionary.org/wiki/issuer Free to share, print, make copies and changes. Get yours at www.boundless.com Obtaining Capital: Methods of Long-Term Financing