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Chapter 19: The Capital Market
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 Exercise 19.1 One- to Two-page Cover Memorandum to Accompany a Copy of an "Online" Business Article

This exercise is designed to help you get acquainted with the role of venture capitalists and to give you some practice in developing your writing skills.

Read the article "That Thing Venture Capitalists Do". (Note: You will have to download an Adobe Acrobat PDF file.)

Memo. Adopt a business writing style (including correct spelling and proper use of grammar) in a one- to two-page, typed memorandum submitted to your instructor (including source citation). The subject of your memo should be an executive summary of this article. The memorandum should be written in such a fashion that even a non-business major could understand the subject. In addition, make a short persuasive recommendation (in the body of the memo) to your instructor to have him or her assign this article as a required reading for the class.

(TIP: For help in mastering the memo format, visit the "Memos" web site at Rensselaer Polytechnic Institute's "Writing Center.")



 Exercise 19.2  The Prospectus

A visit to "How to Read a Prospectus" will provide you with a general overview of the contents of a prospectus. It comes courtesy of the Office of the Missouri Secretary of State.

Now, use the Internet to find a copy of a recent prospectus issued by a company.

Analysis. Analyze the prospectus that you picked according to the following:

 a. The type of security offered: Are there any special features?
 b. The size of the issue and the type of company involved:
 c. The flotation cost: What is the underwriter spread? Is it too high a percentage of the gross proceeds?
 d. The underwriting syndicate: How many underwriters are there? How much of the entire issue is allocated to each underwriter? How do the allocations relate to the size and/or location of the underwriters names on the prospectus cover page?



 Exercise 19.3 The SEC and Investor Education

The SEC's Office of Investor Education and Assistance has a Test Your Money Smarts interactive quiz for students and adults who are learning finance basics. The SEC says that its quiz covers the TOP TEN things you should know about money.

Q. Hmmmm. Let's see how well you handle this quiz.

 a. Take the quiz and report your results (be honest).
 b. Which question(s) did you get wrong (if any)? Why?
 c. Some of the questions actually fit in very nicely with topics covered in various chapters in your text. Match those questions with the appropriate chapters in the text.
 d. Which of the ten questions do you think makes the best, overall, financial management question? Why?


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