Listen to a Business English Dialogue About Flotation cost
Aubrey: Hi Ryan, have you heard about flotation costs in business and finance?
Ryan: Yes, I have. Flotation costs are the expenses incurred by a company when issuing new securities, such as fees paid to investment banks, legal fees, and underwriting fees.
Aubrey: That’s correct. Flotation costs can include various expenses associated with the process of bringing a new security to the market.
Ryan: How do flotation costs impact a company’s finances?
Aubrey: Flotation costs reduce the amount of funds a company raises from issuing securities, as these costs are deducted from the proceeds. This means that companies may receive less capital than the face value of the securities.
Ryan: Are there any strategies companies use to minimize flotation costs?
Aubrey: Yes, companies can reduce flotation costs by negotiating lower fees with investment banks, conducting thorough due diligence, and timing their security offerings to coincide with favorable market conditions.
Ryan: How do flotation costs affect investors?
Aubrey: Flotation costs can indirectly affect investors by reducing the amount of capital available for investment, potentially impacting the overall return on investment for shareholders.
Ryan: Are there any regulations or guidelines regarding flotation costs?
Aubrey: While there are no specific regulations governing flotation costs, companies are required to disclose these expenses in their financial statements to provide transparency to investors.
Ryan: Thanks for explaining, Aubrey. I have a better understanding of flotation costs now.
Aubrey: No problem, Ryan. I’m glad I could help. Let me know if you have any more questions about business and finance topics.