Baby Wears Garments Jagdambay Exports Case Assignment
Jagdambay Exports (http://www(dot)jagdambayexports(dot)com/), amanufacturer and exporter of Baby Wears Garments, is considering‘‘going public'' to raise funds to expand in USA. The Chief FinancialOfficer (CFO) of Jagdambay Exports has approached the investmentbanking firm at which you work seeking help with its decision. Yourboss asked you to explain the nature of the U.S. financial markets andthe process of issuing equity to the CFO of Jagdambay Exports.To help with this task, your boss has asked you to explain somethings regarding the U.S. financial system to CFO of JagdambayExports:1.Explain the components of a financial market and its relevanceto Jagdambay Exports. Be explicit and explain to the CFO howfinancial markets differ from markets for physical assets andwhy that difference matters to Jagdambay Exports.1.Explain the relevance of money markets and capital markets forJagdambay Exports.Analyze Jagdambay exports and advise how the CFO shouldconsider the primary market and secondary market in theexpected transaction. Base your advice, in part, upon the factthat the CFO informed of two things:1.Jagdambay exports decided to issue additional commonstock, and2.An investor purchased 1,000 shares of this commonstock from the underwriter (Merrill Lynch)1.Analyze Jagdambay exports and advise how the CFO shouldconsider the primary market and secondary market in theexpected transaction. Base your advice, in part, upon the factthat the CFO informed of two things:1.Jagdambay exports decided to issue additional commonstock, and2.An investor purchased 1,000 shares of this commonstock from the underwriter (Merrill Lynch).1.Advise the CFO on three primary ways in which capital may betransferred between savers and borrowers in JagdambayExports. Explain the advantages and disadvantages of eachwithin the organization1.Advise the CFO on securities trading on physical exchanges orover-the-counter market. Base your analysis upon what youknow about Jagdambay Exports and discuss why you adviseone method over the other.1.Summarize the U.S. financial system advice to the CFO andprovide a timeline of expected outcomes based on your advice.(This should be no more than a paragraph or two).1.Finally, write 2 -3 sentences about what you learned regardingthe U.S. financial system based upon this assignment.
Jagdambay Exports Case Assignment
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Jagdambay Exports Case Assignment
Concerning the case study at hand, the CFO of Jagdambay Exports has to acquire an upper hand knowledge about the US financial system to understand the nature of the financial market and how it is applicable such an export oriented firm that deals with of baby wears garments. As Jagdambay Exports is considering going public and raising funds in the US market, the CFO is obliged to comprehend the nature of the market system.
Financial market refers to a market system characterized by selling and buying of assets and financial securities to the buyers and sellers respectively (Kolb & Overdahl, 2016). Financial markets can be broadly categorized into two primary components, namely money markets, and capital markets; Money market specifically deals with the short-term financial markets whereas capital markets deal with assets and securities that mature within a period more than one year (Kolb & Overdahl, 2016). However, both the two types of financial markets performs similar functions, which include creation and allocation of credit liquidity, serve as intermediaries for mobilization of savings, helps achieve balanced economy as well as offering financial convenience (Kolb & Overdahl, 2016).
Money market entails financial instruments such as shares, debentures, certificate of deposit, Treasury bill, calls loans and repurchase agreement. Thus instruments are commonly used in the American money markets. Also, money markets run parallel money markets such as the inter-bank market which provides a platform to obtain commercial loans from one financial institution to another and inter-company deposits markets by which allows firms to secure short-term loans that are available in the US market from one company to another (D'Arista, 2014). Also, the parallel money markets incorporate a foreign currency market that deals that are usually available in foreign currencies that are deposited within the short term. The money market is useful in many ways; first, it provides the lenders with a reliable and well-structured system for monetary assets transactions as well as meeting borrower’s short-term requirements (D'Arista, 2014). Second, it provides a medium of redistributions of loans and able funds among the banks. Lastly, monetary markets allow the institutions specialized in credit to lend a portion of their surplus deposits to businesses as call-loans (D'Arista, 2014).
On the other hand, the capital market is further divided into primary and secondary markets. The primary market focuses on new securities issued whereas secondary markets handle the securities that are currently available in the stock market (Chance & Brooks, 2015). In general, the capital market is useful for the business as it permits firms to gain access to long-term funding for expansion and growth purposes. Instruments of the capital market include debentures shares, debentures bonds, mortgages and treasury notes. In particular, this tool allows business to raise funds from the capital market by issuing share to the member of the public for subscriptions (Chance & Brooks, 2015). For example, the issuance of debentures and bonds have remained a vital part of monetary policies for any government or company, which is carried efficiently through capital markets. In this case, Jagdambay exports can raise funds through the sale of its securities as they are available in the both primary and secondary capital market (Chance & Brooks, 2015). As aforementioned, the decision for Jagdambay Exports to issue additional common stock, whereby an investor has already purchased 1,000 shares of this common stock from the underwriter is an indication that the U.S. stock market permits investors to trade shares publicly and provide companies with access to capital and investors. Jagdambay Exports can raise the required funds by welcoming members of the public to subscribe to its shares after having it listed on the New York Stock Exchange. Also, it is vital to realize that financial markets differ from markets for physical assets in some ways. Notably, the main difference between the two is that whereas the financial market is intangible, the physical assets are tangible. This is essential information for the company to know that since tangible assets are likely to depreciate or lose value due to wear and tear. On the other hand, the financial market does not experience that such deterioration except on the cases of market volatility (Willsher, 2016).
Basing on the two facts whereby Jagdambay Exports decided to issue additional common stock, and an investor purchased of this common stock from the underwriter, Merrill Lynch, it indicates the Jagdambay Exports 1,000 shares has underlying transactions that should conside...