CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
5th Edition
ISBN: 9781305661653
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 3, Problem 1PROB
Summary Introduction

Financial markets are the markets or the place where financial instruments like equities, bonds, derivatives, currencies, and precious metals are traded among buyers and sellers. These markets represent the mechanisms by which investors and debtors are brought together.

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The following are the ways in which financial markets run freely and efficiently, and affect the standard of living in a country.

In financial markets, an investor gets an opportunity to make a choice to select the available investment securities which give high returns with low risk.

In financial markets, a borrower can get the optimum terms for his debt or borrowings with respect to his need and credit worthiness.

Financial intermediaries in the financial markets such are banks, credit unions, etc., collect deposits from investors and provide loans to individuals and firms those required. These intermediaries bring together investors and borrowers as efficiently as they currently do.

Financial markets provide an opportunity for foreign investors through foreign direct investment which makes more investments for small organizations and helps in increasing employment.

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General Finance Question
Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896
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