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Capitalization Lecture

Capital refers broadly to anything that provides value or benefit to its owner. For businesses, capital typically comes from operations, debt, or equity and is used for daily operations and future growth. There are three main types of capital: working capital, equity capital, and debt capital. The capital structure determines the mix used. Capital markets are where funds are exchanged between capital suppliers and demanders, including primary markets for new securities and secondary markets for existing securities.

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44 views15 pages

Capitalization Lecture

Capital refers broadly to anything that provides value or benefit to its owner. For businesses, capital typically comes from operations, debt, or equity and is used for daily operations and future growth. There are three main types of capital: working capital, equity capital, and debt capital. The capital structure determines the mix used. Capital markets are where funds are exchanged between capital suppliers and demanders, including primary markets for new securities and secondary markets for existing securities.

Uploaded by

Rubie Aranas Lagare
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CAPITALIZATION

CHRISTIAN NEIL A. RAMOS, MBA, CIA


CBET – Financial Management
Capital
• Capital is a broad term that can describe any thing that
confers value or benefit to its owner, such as a factory
and its machinery, intellectual property like patents, or
the financial assets of a business or an individual. While
money itself may be construed as capital is, capital is
more often associated with cash that is being put to work
for productive or investment purposes.
Capital
• In general, capital is a critical component of running a
business from day to day and financing its future growth.
Business capital may derive from the operations of the
business or be raised from debt or equity financing.
When budgeting, businesses of all kinds typically focus
on three types of capital: working capital, equity capital,
and debt capital. A business in the financial industry
identifies trading capital as a fourth component.
Understanding Capital
• The capital of a business is the money it has available to
pay for its day-to-day operations and to fund its future
growth.
• The capital structure of a company determines what mix
of these types of capital it uses to fund its business.
• From the economists' perspective, capital is key to the
functioning of any unit, whether that unit is a family, a
small business, a large corporation, or an entire
economy.
• Capital can be a measurement of wealth and also a
resource that provides for increasing wealth through
direct investment or capital project investments.
Capitalization
• Capitalization refers to the book value or the total of a
company's debt and equity.

• Capitalization is an accounting method in which a cost is


included in the value of an asset and expensed over
the useful life of that asset, rather than being expensed
in the period the cost was originally incurred.
Capital Market
• Capital markets refer to the venues where funds are
exchanged between suppliers of capital and those who
demand capital for use.

• Market for long term securities. This is where companies


and governments go to raise long-term capital. 

• Can be primary, secondary, third, and fourth market


PRIMARY MARKET

• The primary market is where securities are created. It's in this


market that firms sell new stocks and bonds to the public for
the first time.
• Proceeds go to the issuer
• New issues of bonds, preferred stock or common stock are
sold by government, municipalities and companies to acquire
new capital
- IPOs, Follow-on offering
- T-bills
- Municipal Bond
PRIMARY MARKET
SECONDARY MARKET
• A market where investors trade previously issued securities
without the issuing companies' involvement.
• Proceeds go to the shareholder
• Conducted in an exchange or centralized market for secondary
trading stocks, bond and other securities. - PSE
- NYSE
- HK Stock Exchange
SECONDARY MARKET
SECURITIES
- refers to a fungible, negotiable financial
instrument that holds some type of monetary
value. It represents an ownership position in a
publicly-traded corporation via stock; a creditor
relationship with a governmental body or a
corporation represented by owning that entity's
bond; or rights to ownership as represented by
an option.
SECURITIES
PHILIPPINE STOCKS EXCHANGE
• is the national stock exchange of the Philippines. The exchange
was created in 1992 from the merger of the Manila Stock
Exchange and the Makati Stock Exchange. Including previous
forms, the exchange has been in operation since 1927
PHILIPPINE STOCKS EXCHANGE
PHILIPPINE STOCKS EXCHANGE

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