Whole Food Case
MBA-630 FINANCIAL MARKETS
FLOW OF FUNDS EXERCISE (CARSON COMPANY)
a. Carson Company was financed with an equity investment. It shows Carson is a surplus unit as they anticipate income from dividends and capital gains as the value of their stock rises. Carson also has purchased Treasury securities which finance federal government expenditures as a surplus unit.
b. Carson Company is a deficit unit in borrowing fund from finance companies and commercial banks which lend the funds to individuals and small business. It is also a deficit unit because it has a credit line with a bank.
c. Finance companies can facilitate Carson's expansion by providing additional loans.
d. Commercial banks can facilitate Carson's expansion by providing additional loans or purchasing debt securities.
e. Carson Company already has loans from commercial banks and finance companies. It also has a credit line with a bank. If Carson uses its credit and still wants additional debt financing, financial institutions may be unwilling to provide funds. They may think Carson will default on its obligation to repay the debt.
f. Security firms can help Carson by underwriting newly issued securities or selling the security at the best price. Carson company might consult security firms for corporate restructuring and they may help execute the changes in the capital structure by keeping under control the securities which are issued by Carson Company.
g. Carson Company can issue stock in the primary market. Primary market provides new financing and funds to the issuer of securities. It may help Carson Company to expand its operations.
h. Secondary market allows investors to trade existing securities. Carson Company has purchased Treasury securities and it can sell the stock to other investors who want to buy it in secondary market. It may receive funds after selling its stocks.
i. If financial markets were perfect, Carson would have had access to information and would
FLOW OF FUNDS EXERCISE (CARSON COMPANY)
a. Carson Company was financed with an equity investment. It shows Carson is a surplus unit as they anticipate income from dividends and capital gains as the value of their stock rises. Carson also has purchased Treasury securities which finance federal government expenditures as a surplus unit.
b. Carson Company is a deficit unit in borrowing fund from finance companies and commercial banks which lend the funds to individuals and small business. It is also a deficit unit because it has a credit line with a bank.
c. Finance companies can facilitate Carson's expansion by providing additional loans.
d. Commercial banks can facilitate Carson's expansion by providing additional loans or purchasing debt securities.
e. Carson Company already has loans from commercial banks and finance companies. It also has a credit line with a bank. If Carson uses its credit and still wants additional debt financing, financial institutions may be unwilling to provide funds. They may think Carson will default on its obligation to repay the debt.
f. Security firms can help Carson by underwriting newly issued securities or selling the security at the best price. Carson company might consult security firms for corporate restructuring and they may help execute the changes in the capital structure by keeping under control the securities which are issued by Carson Company.
g. Carson Company can issue stock in the primary market. Primary market provides new financing and funds to the issuer of securities. It may help Carson Company to expand its operations.
h. Secondary market allows investors to trade existing securities. Carson Company has purchased Treasury securities and it can sell the stock to other investors who want to buy it in secondary market. It may receive funds after selling its stocks.
i. If financial markets were perfect, Carson would have had access to information and would