UOP ACC 300 Week 5 Assignment

ACC/300

July 19, 2015

Running head: GLOBAL ENVIRONMENTS 1

Our team has chosen to research the publicly traded corporation Chesapeake Energy (CHK). We will include a copy of the company’s latest financial statements that we will also review. Specifically, we will analyze the corporation’s debt securities and stock investments from the statement. Next, we will identify why Chesapeake would invest in debt securities and stocks. Then we will evaluate the relative risks and rewards of equity versus debt securities and distinguish the difference between equity and debt securities. Lastly, we will determine the current health of the company using the current financial statement.

About Chesapeake Energy

Debt Securities

Chesapeake Energy Corporation debt securities can be located on the balance sheets as the following. At the end of December 2014, Chesapeake Energy Corporation had debt securities as Preferred Stock at 3,062 million. The corporation had Preferred Stock of 3,062 million as of March 31, 2015.

Chesapeake’s Investments

Chesapeake Energy Corporation has its stock investments located on the balance sheet. For December 31, 2014, they had Non-controlling interests at 1,302 million, Common stock and other stockholders’ equity at 13,841 million, and Common Shares Outstanding at 663 million. As of March 31, 2015, the corporation had Non-controlling interests at 1,295 million, Common stock and other stockholders’ equity at 10,016 million, and Common Shares Outstanding at 664 million.

Investing in Stocks and Securities

Chesapeake Energy Corporation would invest in stocks and debt securities because they would be able to generate income. It could also provide a steady stream of income in tough times. They could increase their net worth by investing in high yield securities. If the corporation invested in safer funds, they could protect their assets.

Equity versus Debt Securities

· What are the corporation’s relative risks and rewards of equity versus debt securities?

Differentiating between Equity and Debt Securities

Securities given out by some corporations can be classified as equity securities and debt securities. Debt must paid and also a result of borrowing money. When a company borrows money, it is a promise to make regular interest payments and pay back the principal amount that was borrowed. The firm who is making the loan is called the creditor or a lender. And the firm who is borrowing the money is called the debtor or the borrower. However there are main differences between debt and equity securities.

Debt is not an ownership interest of the company. Creditors do not have a capability of voting. It is considered a cost of doing and is fully tax deductible when the company’s payment of interest on debt. However, dividends that are paid to the stockholders are NOT tax deductible. Any unpaid debt is a liability to the firm. When it is not paid, creditors can legally claim assets to the firm. This includes in liquidation or bankruptcy in which it would lead to a financial failure.

Chesapeake Energy Current Health

Use the organization’s financial statements to determine its financial health.

Identify examples from the organization’s financial statements to justify the team’s responses.

Conclusion

To summarize, our team chose to research Chesapeake Energy (CHK). We included a copy of the company’s latest financial statements that we will also reviewed. Specifically, we analyzed the corporation’s debt securities and stock investments from the financial statement. Next, we identified why Chesapeake would want to invest in debt securities and stocks. Then we evaluated the relative risks and rewards of equity versus debt securities and distinguished the difference between equity and debt securities. Lastly, we determined the current health of the company.

References

Jaffe, J., Westerfield, R. Introduction to Corporate Finance. Core Principles and Applications of

Corporate Finance. Third Edition. Pp.35-51. McGraw-Hill.