117 Capital Market - Clearing and Settlement IS M R Capital Market - Clearing and Settlement Introduction The transactions in secondary market pass through three distinct phases‚ viz.‚ trading‚ clearing and settlement. While the stock exchanges provide the platform for trading‚ the clearing corporation determines the funds and securities obligations of the trading members and ensures that the trade is settled through exchange of obligations. The clearing banks and the depositories provide
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Capital structure describes how a corporation has organized its capital—how it obtains the financial resources with which it operates its business. Businesses adopt various capital structures to meet both internal needs for capital and external requirements for returns on shareholders investments. As shown on its balance sheet‚ a company’s capitalization is constructed from three basic blocks: Long-term debt. By standard accounting definition‚ long-term debt includes obligations that are not
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Grant Nauta AHP Case Study Because American Home Products (AHP) currently operates with virtually no debt‚ their financial risk is very small. This shifts the burden heavily towards business risk. A porter’s five forces analysis is appropriate to determine the exact levels of business risk for American Home Products. First‚ the threat of substitutes is a risk that AHP cannot afford to ignore. Because they spend very little on Research and Development‚ and have to rely on their marketing to catch
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What long-term investments should the firm undertake (capital budgeting) and how will investment and finance decisions affect the firm ’s value (valuation)? How can cash be raised for the required investments? This is known as the financing decision ’ (cost of capital‚ capital structure and leasing). How will the firm manage its day-to-day cash and financial affairs (short-term financing and net working capital)? The Capital Budgeting Mini Case presents a financial decision of acquiring
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1) How much business risk does AHP face? How much financial risk would AHP face at each of proposed level of debt? a) General risks: • Strategic risk from internal management structure change‚ due to Laporte was approaching retirement that will cause another big waive of change for the whole senior management team as well as the company’s strategy. • Market risk. Pharmacy had not reached the heavy competition yet during early 1980s‚ AHP was still the early adopter in the industry‚ however‚ the nature
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American Home Products (AHP) has established a strong track record of revenue growth and return on equity over the past decade‚ producing a host of products in four separate business lines: prescription drugs‚ packaged drugs‚ food products‚ and housewares/household products. AHP’s distinctive culture emphasizes conservatism‚ cost control and risk aversion. AHP’s corporate structure also concentrated most decision-making authority with the incumbent chief executive‚ William F. Laporte. This approach
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American Home Products 1. How much business risk does American Home Products face? How much financial risk would American Home Products face at each of the proposed levels of debt shown in case Exhibit 3? How much potential value‚ if any can American Home Products create for its shareholders at each of the proposed levels of debt? (See Exhibits 1 and 2 ) American Home Products currently has low business risk due to the conservative nature of their business. They piggyback on first movers
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Capital Structure and Debt Structure* Joshua D. Rauh Kellogg School of Management and NBER Amir Sufi University of Chicago Booth School of Business and NBER February 2010 *We thank Doug Diamond‚ Anil Kashyap‚ Gordon Phillips‚ Michael Roberts‚ Toni Whited‚ Luigi Zingales‚ and seminar participants at Emory University‚ Georgetown University‚ Maastricht University‚ Rice University‚ Tilburg University‚ the University of California-Berkeley‚ the University of Chicago‚ the University of Colorado
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Introduction American Home Product (AHP) was founded in 1926 with the merging of several small home product companies. As the company expanded in the 1930’s‚ it acquired companies in different businesses. After World War II‚ the company had four lines of businesses: prescription drugs‚ packaged (over-the-counter) drugs‚ food products‚ and housewares and household products. Although the name “American Home Product” has never appeared on its products‚ the firm produces many well-known brands in the
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Write UP On AMERICAN HOME PRODUCTS CORPORATION: Company Overview Background Information: American Home Products Corporation (AHP)‚ is a pharmaceutical company. The company was based in Madison‚ New Jersey‚ USA. They were known for manufacturing the over-the-counter (OTC) drugs Robitussin and the analgesic Advil (ibuprofen)‚ as well as the prescription drugs Premarin and Effexor‚ which both boast over US$3 billion in sales annually. American Home Product Corporation (AHP)‚ a highly growing
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