Bank: Financial Literature Review
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Cash Reinvested in the corporation Cash flow from operation
3. Cash distributed to investor Taxes
Figure 2.1 : Interaction of corporation and financial market Figure above is explaining about relationship among government,
individuals, and corporation. Initially corporation raising funds in the financial markets by selling securities. Corporation receives cash in return
for securities-stocks and debt. Corporation then invests this cash in return- generating assets new projects for example and the cash flow from this
Corporat ion 2.
Corporat ion invest in
ret urn generat ing
asset
Governm ent 1.
Prim ary M arket Cash
Securit ies Invest ors
Secondary M arket s
Securit ies t raded
am ong invest ors
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assets is then either reinvested in the corporation; given back to the investors in the form of dividens or interest payments, or used to
repurchase stock, which cause the stock price to raise; or given to the government in the form of tax payments. Arthur J. Keown : 2009
Table above, we can see the financial market elements just like primary market and secondary market. A primary market is a market in
which new, as opposed to previously issued, securities are traded. Once the newly issued stocks in the public’s hands. It then begin the trading
in the secondary market. Arthur J. Keown 2009:11. In primary market, there is the trading of initial public offering begin.
4. Initial Public Offering IPO Primary market which is the primary trading of claims, initial
public offering of company also happen there. According to Achleitner 2002 ; .242 Initial Public Offering IPO
means initial placing of enterprise’s shares on an organized capital market.
According from Richard P. Kleeburg 2005 said that initial public offering is the process many business owners go through in the
hope of becoming extremely wealthy. The IPO marks the beginning of the process. The decision to launch an IPO often means a decision to