FINANCE BUSINESS

New Issue Shares

the sale of shares to the public— helps to fund the business on an increased scale, improve operations and invest in tech
— can dilute ownership as large number of owners are equity holders

Rights Issue shares

privilege granted to shareholders to buy new shares in same company (sometimes offered in a discount)

Placement shares

Portion of shares made directly from company to investors— additional shares at discounted prices which is intended to persuade specific investors to invest in company

Share Purchase Plan

offer to existing shareholders in a listed company to purchase more shares in that company without brokerage fees

Private equity

money invested in a private company and not listed on the ASX

• aim: raise capital to finance future expansion/investment of the business
  

Adv: cost of finance can be postponed as shareholders not need to be paid immediately

Disadv: ownership becomes more diluted among more people

What are the financial institutions

Banks
Unit trusts
Superannuation funds
Finance companies and Life insurance
ASX
Investment banks
Life Insurance

Banks

(most important)
receive savings as deposits from individuals, businesses and governments, they make investments and loans to borrowers

Investment Banks

Provides services in borrowing and lending $$$ primarily in the business sector
—> help access capital markets, act as intermediaries in mergers/acquisition of companies

Finance companies

• specialise in smaller commercial finances

• provides businesses/individuals funds through consumer hire-purchase loans, personal loans, and secured loans (short and medium term solution)

Life Insurance

financial intermediaries who provide a lump sum payment in the event of deaths

Superannuation funds

A scheme set up by the federal government which requires all employers to make financial contributions to a fund which will provide benefits to an employee when retired

Unit Trusts

take funds from a large number of small investors and invest them in specific types of financial assets e.g. gold

ASX

Aus largest stock exchange allowing companies and trusts to issue securities to general public to raise funds

Influence of governments

Australian Security & investment commission and company taxation

Australian securities and investment commission (ASIC)

→ enforces corporations Act 2001 (cwth) and protects consumers in the areas of investments, insurance, superannuations and banking
→ Main aim: reduce fraud and unfair practices in financial markets and products
→ Thus, ensures companies follow the law and ensures the company discloses certain financial info in annual reports

→ if a business breaches law, ASIC can pursue remedies such as imprisonment or penalties

Company taxation

All incorporated companies are required to pay tax on profits → pay a flat rate of company tax (roughly 30%) on net profits

• Improves international competitiveness

• attract more investment, driving long-term economic growth

What are the global market influences

1. economic outlook

2. availability of funds

3. interest rates

Economic outlook

Changes in global economic outlook relate specifically to changes in economic growth rate of individual economies throughout the world

Availability of Funds

global market increasingly affects business financial decisions, evident in AoF for loans and the interest rates charged for these loans

→ wider availability of funds when trading in a global market

Interest rates

Cost of borrowing money→ the higher the risk involved, the higher the interest rate