Corporate Issuers

Résumé

Corporate Issuers examines firms from the perspective of the issuer of securities, covering organizational forms, governance, business models, and the financing and investment decisions that create value. Corporate structures range from sole proprietorships and partnerships to limited companies, with attention to ownership, limited liability, and the separation of ownership and control. Corporate governance and stakeholder management address the roles of shareholders, the board, and other stakeholders, the principal-agent problem, and mechanisms that align incentives and manage conflicts. Business models describe how firms create, deliver, and capture value. Capital investment, or capital budgeting, evaluates projects using net present value and internal rate of return, with NPV preferred for its consistency with shareholder wealth maximization; analysts incorporate incremental after-tax cash flows and ignore sunk costs. The cost of capital combines the after-tax cost of debt, the cost of preferred equity, and the cost of common equity (often via the capital asset pricing model) into a weighted average cost of capital used to discount projects. Capital structure theory considers the trade-off between the tax benefit of debt and the costs of financial distress, the Modigliani-Miller propositions, and the effect of leverage on risk and return. Measures of leverage include the degree of operating, financial, and total leverage. Working capital and liquidity management address the cash conversion cycle, short-term funding, and sources of liquidity. Capital allocation links these decisions to long-run value creation for the firm and its providers of capital.