Stock and Bonds - Business Finance - ثاني ثانوي

7 Stock and Bonds ? How do investors decide which companies to invest their money in? There are many factors that investors need to consider when they are deciding what to invest in. A

LEARNING OBJECTIVES Once you have completed this chapter, you should be able to: Understand the various sources of 1 funding for a company. Describe the advantages and 2 disadvantages of common stock. Explain the strategies influencing a 3 company's dividend policy. Explain the advantages and 4 disadvantages of preferred stock. 5 Describe the characteristics of all debt instruments. 6 Describe the types of corporate bonds. 7 Explain how companies can retire debt. 253082 17873 8 Understand the role of government securities and national debt. 267

P 268 Business Finance n the Kingdom of Saudi Arabia, joint stock companies are regulated by the Capital Market Authority (CMA), as discussed previously in Chapter 4. The Saudi Vision 2030 has set a goal of facilitating the flow of private investment to improve Saudí business competitiveness. In response, Saudi Arabia's Cabinet of Ministers has set regulations designed to modernize the Saudi corporate law framework and provide flexibility in operating existing businesses in Saudi Arabia. These new regulations are also designed to attract foreign investment into the Saudi Arabian market by following international practices. This chapter covers sources of funding available in public markets including common and preferred stock, and bonds. Companies need to determine the distribution of retention of earnings, stock dividend policy, stock splits, and stock buy-backs. Companies also need to determine how they can receive funding in bond markets. There always needs to be a balance between the various sources of funding for a business to limit risks and ensure business operations. Fahd is eager to use his considerable corporate finance management experience in his new position as a chief financial officer (CFO). Fahd reports directly to Turki, the company's new chief executive officer (CEO). Their joint stock company, or corporation, has been in business for five years and the board of directors wanted new management to help the company grow. Fahd has reviewed the company's financial statements from both the public annual and quarterly reports, and internal documents. Turki wants to raise additional capital and has asked Fahd to review selling common stock to individuals who will become part owners (shareholders) in the corporation, as well as other financing options. Fahd needs to determine if the corporation should issue preferred stock or bonds, but he is not sure of the credit rating for the company. They have a Shariah-compliant business, so they are also considering the sukuk market.