Chapter 2: The Financial Market Environment
Chapter 2: The Financial Market Environment FIN 315
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This 3 page Class Notes was uploaded by Chris Holder on Saturday January 23, 2016. The Class Notes belongs to FIN 315 at a university taught by Dr. Milanese in Spring 2016. Since its upload, it has received 108 views.
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Date Created: 01/23/16
FINANCE 315 JAN 19, 2016 CHAPTER 2 THE FINANCIAL MARKET ENVIRONMENT What are we talking about: Financial Markets What are Markets? Buyers and sellers coming together to determine how products are sold. When Prices of supply and demand are equal they are at, equilibrium price Financial Markets Money Markets Capital Financing Markets Short Term debt Long Term debt & equity Primary Market Transaction, Sold from Company to Customer Secondary Market Transaction, Sold peer-to-peer. Sold outside of primary Market Initial Public Offering (IPO) AKA Going Public, the translation from privately funded to the publically funded market Financial Institution, brought together at the financial institution (Wells Fargo Bank) Financial Market, the coming together of supply/deamand Stock Markets “Listed” Organized Exchange/ Physical Locations Stock Exchange A physical, tangible place where buying and selling of stock occurs i.e The NEW YORK STOCK EXCHANGE ( in New York City) Types of Organized Stock Exchanges: NYSE American Exchange Regional Stock Market “Unlisted” Market AKA Over the Counter (OTC) No physical, tangible location, stock is sold and exchanged over electronically interchange. Over the internet In order to trade must be apart of NASD( National Association of Securities Dealers) NASDAQ Bid & Ask Price NASDAQ Question Time?? “What Drives Markets?” Answer: Information. Information drives markets Overview on taxes Table 1.1 (Federal Level) Taxes example *All Dividends can only be taxed at 70% to help alleviate the double taxation issue. Double Taxation: The situation that occurs when after, tax corporate earnings are distributed as cash dividends to stockholders, who then must pay personal taxes on the dividend amount. Operations $500,000 Interest $200,000 Dividend $60,000 (*only 70% taxed = $18,000) Total $718,000 Taxable Income TaxableIncome =Average TaxRate TaxesDue Corporate Tax Rate Schedule (Progressive Tax) 113,900 + ((718000 – 335,000)(0.34)) 113,900 + ((383,000)(0.34)) 113,900 + (130,220) = $244,120 Taxes Due Marginal Tax Rate: the rate of tax for the next dollar of taxable income
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