Issuance
The process of bringing new securities to market — equity, debt, or hybrid — to raise capital.
The exam rarely asks you to define issuance — it makes you match a financing need to the right method or rank financing choices. The tell is which feature dominates: speed and minimal disclosure point to a private placement or bank loan; protecting current shareholders points to a rights offering (existing holders buy new shares first, pro rata, often at a discount); a few-weeks horizon for a high-credit issuer flags commercial paper. The hinge is usually the pecking-order priority in the tip — internal funds, then debt, then equity last.
The classic trap is confusing issuance (raising new capital) with dilution and cost of capital. Issuing new equity raises capital but dilutes ownership; issuing debt raises capital without dilution but adds the after-tax cost that feeds WACC. A rights offering is the anti-dilution route — owners who exercise keep their percentage. Watch the terminology: CFAI calls a firm’s later equity sale a seasoned/follow-on offering (new shares, dilutive), whereas a true secondary offering is existing holders reselling old shares (no new capital, non-dilutive).
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