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± Replacement investment - this is where companies buy new
machinery and equipment that simply replaces
± Net investment - this is where companies buy new machinery
or equipment.





‡ Investment Banks help companies and governments raise
money by issuing and selling securities in the capital
markets (both equity and debt), as well as providing advice
on transactions such as mergers and acquisitions. Until the
late 1980's, the United States and Canada maintained a
separation between investment banking and commercial
banks.
‡ Financial intermediary that performs a variety of services.
‡ This includes underwriting, acting as an intermediary
between an issuer of securities and the investing public,
‡ Facilitating mergers and other corporate reorganizations,
and also acting as a broker for institutional clients.

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± Service entities who wish to raise funds through sales of debt
and equity securities, including corporations or governments;
services include
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 securities in
money and capital markets
‡ The wholesale side of the business
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± services involve assistance in the trading of securities in the
secondary markets (brokerage services or market making)
‡ Purchase, sale, and brokerage of securities
‡ The retail side of the business

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advising on the restructuring of existing corporations

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 that service retail and
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± the remainder of the industry and includes five subclasses
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± These subsidiaries continue to make inroads into the markets held by
traditional investment banks as the restrictions imposed by the Glass-
Steagall Act, which separates commercial banking from investment
banking, are slowly removed. (e.g. J. P. Morgan)

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± providing trading services such as the purchase and sale
of stocks, without offering any investment tips, advice or
financial counseling. (e.g. Charles Schwab)
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± that offer most of the services mentioned above but
restrict their activities to specific geographical locations.
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‡ Involves managing pools of assets such as

mutual funds
‡ Compete with commercial banks, life insurance
companies, and pension funds
‡ Manage funds either as agents for other investors
or as principals
‡ Objective is to select asset portfolios to beat
some return-risk performance benchmark such
as the S&P 500
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large institutional investors
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firm commitment basis and offered to the public

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± Ã
 
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customers
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the price movements of securities and takes long or short
inventory positions for its own account

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 - purchases of large blocks on expectation of
favorable price move
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- buying an asset in one market and selling it
immediately in another market at a higher price
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 buying securities in anticipation of some
information release
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computer program to initiate such trades
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- trading securities on behalf of individuals
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- offered by major brokers, direct
access via internet to trading floor

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‡ Securities firms and investment banks offer

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± money market mutual fund sold by investment
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± assist in finding merger partners
± underwrite any new securities
± asses the value of target firms
± recommend terms of the merger agreement
± assist target firms in preventing a merger

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‡ Clearance and settlement services

‡ Research and advisory services

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