Chap 5: LT

Front

What is issue underwriting?

Back

Issue underwriting is the process by which underwriters help issuers (companies) to sell new securities to investors, ensuring a higher degree of success for the issue.

Front

What is the primary market?

Back

The primary market is where new securities are created and sold for the first time, allowing issuers to receive funds directly from investors.

Front

What is the difference between the primary and secondary markets?

Back

The primary market involves the issuance of new securities, while the secondary market involves the trading of existing securities.

Front

What is private placement?

Back

Private placement is a method of raising capital by selling securities directly to a small number of investors, rather than through a public offering.

Front

What are the characteristics of the primary securities market?

Back

The primary market operates infrequently, issuers receive money from selling new securities, and it facilitates long-term capital formation.

Front

What is the role of underwriters in issue underwriting?

Back

Underwriters assist issuers in reviewing financial management, ensuring success, and saving time during the issuance process.

Front

What is a firm commitment underwriting?

Back

Firm commitment underwriting is when the underwriter buys the entire issue of securities from the issuer and then resells them to the public, taking on the risk of unsold shares.

Front

What is best efforts underwriting?

Back

Best efforts underwriting is when the underwriter agrees to sell as much of the issue as possible but does not guarantee the sale of the entire issue.

Front

What is stand-by underwriting?

Back

Stand-by underwriting is a type of underwriting where the underwriter agrees to purchase any unsold shares in a rights offering.

Front

What is the capital market?

Back

The capital market is a financial market where long-term debt or equity-backed securities are bought and sold.