Business Borrowing参考.ppt

Business Borrowing ? Learning Objectives ? To look at how business firms issue debt securities and negotiate loans in order to raise funds in the money and capital markets. To learn about the key factors affecting the volume of funds that businesses seek to raise in the financial system. To see the often powerful impact that business borrowing has upon market interest rates and credit conditions. Introduction Business firms draw on a wide variety of fund sources to finance their daily operations and to carry out long-term investment. In 2000, nonfinancial business firms in the U.S. raised about $1,250 billion, of which approximately $860 billion was supplied from the financial markets through issues of bonds, stocks, notes, and other financial instruments. Factors Affecting Business Activity in the Money and Capital Markets Many factors affect the extent to which business firms draw on the money and capital markets for external funds: Total funding demands of business firms Level and expected growth of internally generated funds Condition of the economy Credit availability and interest rates Characteristics of Corporate Notes and Bonds A note has an original maturity of five years or less, while a bond carries an original maturity of more than five years. Both securities promise the investor an amount equal to the security’s par value at maturity plus interest payments at specified intervals. They are generally issued in units of $1,000, and accompanied by indentures. Characteristics of Corporate Notes and Bonds Corporate bonds tend to be issued with longer maturities when both interest rates and inflation are low. Some corporate bonds are backed by sinking funds. A considerable proportion of corporate bonds that are outstanding today carry call privileges. Characteristics of Corporate Notes and Bonds During periods of rapid economic expansion, when the supply of credit is relatively scarce, the cost of borrowing rises. Yields on the highest-grade bonds tend to mov