Week 4
DQ 1
o What is investment banking? How would an investment banker assist an organization in going public? As a chief financial officer, what information would you need to select an investment banker?

What is investment banking?

The term investment banking can be defined as structure of banking prepared by the organizations that are involved in the investment banking, usually in exchanging in terms of particular fees or commissions. The bank therefore executes public offerings, might perform as a negotiator as well as transmits by means of the mergers or acquisitions. Investment banking also states that a financial mediator that concentrates in promoting innovative safety approaches along with the organizations that are involved in providing the suggestions by means of considering the most important monetary dealings. (Gitman, 2006, p. 336).

How would the investment banker assist an organization in going public?
The most widely used technique that is utilized by the investment bankers is underwriting. It incorporates borrowing at a cost that was in favor of both parties and both parties are mutually agreed upon it as well as acknowledging the risk jeopardy of again selling it but on a percentage of revenue or profits.

As a CFO, what information would you need to select an investment banker?
Being on the post of CEO there are a lot of factors that must be taken into account at the time of choosing the banker who is involved in investment. According to the famous website BNET there are six factors that must keep in mind at the time of picking the investment banker. This is further mentioned below.
1. KNOWLEDGE OF CONFIDENTIAL CORPORATION: the investment banker must have know-how related to the concealed corporations.

2. HIGHER LEVEL CONCENTRATION: the senior investment banker needs to effort deliberately along with you throughout all aspects of the dealings plus signifies you exceptionally within the market.
3. PURCHASER CONTACTS AS WELL AS ENCOURAGEMENT: the investment banker that was hired by you needs to be capable to have in no time the broad local as well as foreign purchasers contact details along with the endorsements assistance assets or possessions at the time of selling the organization.
4. RESPONSIVE TO YOUR SELLING TARGETS: the investment banker must comprehend the corporation as well as you existing selling targets must be adequately healthy to bargain the transaction you actually require.
5. CONFIDENTIALITY: the investment banker that was hired by you must give importance to the level of confidentiality that you desire as well as must be capable to alter or modify the sales techniques by the same way.
6. LUCRATIVE OR MONEY_MAKING: the investment banker needs to charge that amount that must not be very high, it should be cost-effective, that might results in the accomplishment of the demanded cost through out the provided time duration.


BNET. (2010). Six Criteria for Selecting an Investment Banker. Retrieved June 16, 2010 from http://findarticles.com/p/articles/mi_qa3840/is_199910/ai_n8877113/

Gitman, L. (2006). Principles of Managerial Finance (11th ed.). New York, NY: Pearson, Addison Wesley.

DQ 2

What is the difference between operating and financial leverage?

The term leverage can be defined as the extent to which an investor or corporation is making the use of borrowed amount. Therefore leverage or influence might be the outcome commencing the utilization operating costs resources or finances to expand the proceeds to the company’s proprietors” (Gitman, 2006, p. 553). If there is a decline in the leverage outcomes in the shrink in profits along with the possibility, however an enhancement in the leverage or influence might upshot in amplifies in proceeds as well as the jeopardy.
“Operating or working Leverage arises from the continuation of the permanent operating or working expenses inside the corporation’s revenues”. Secondly when we take into account the financial leverage it results from the existence of permanent monetary or financial expenses through out the corporation’s earnings.

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

The overall leverage or influence as well as the entire collision of the predetermined overheads surrounded by the organization’s working or operating as well as the monetary configuration might be defined as the prospective or impending utilization of the permanent expenses that includes both the operating or working in addition to the monetary or financial to amplify the impacts of alterations in sales upon the company’s proceeds per share” (Gitman, 2006, p. 548).


Gitman, L. (2006). Principles of Managerial Finance