FIN 419 Week 4 DQs - 7635

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Request Description

What is investment banking?

How would the investment banker assist an organization in going public?

 

 

As a CFO, what information would you need to select an investment banker?

 

What is the difference between operating and financial leverage?

 

What is the importance of assessing operating vs. financial leverage?

What are the risks of having an excessive amount of financial leverage in an organization?

What is the degree of total leverage?

What is EBIT-EPS analysis?

 

What is the indifference curve?

How is risk factored into the EBIT-EPS analysis?

What are the “basic short comings” of EBIT’s analyses?

Solution Description

 

Investment banking is, “Financial intermediary that specializes in selling new security issues and advising firms with regard to major financial transactions” (Gitman, 2006, p. 336).

Underwriting is the main activity of the investment banker. Underwriting involves purchasing at an agreed price and bearing the risk of reselling it for a profit.

As a CFO, there are several items that should be considered when selecting an investment banker. The BNET website lists 6 items for selecting an investment banker as follows:

 

  1. PRIVATE COMPANY EXPERIENCE: Your investment banker should have broad experience selling private companies.

 

  1. SENIOR LEVEL ATTENTIONA: