Keller / Devry
Managerial Finance - FIN-516
Visa
American Express and the Diner’s Club were the forerunners in the consumer credit card business issuing their first cards to approximately 200 people in the mid to late 1950’s. The cards were mainly used for restaurants and entertainment purposes and the balances had to be paid immediately. In the summer of 1958, Bank of America (which would later grow and spinoff Visa and also become spinoff itself as the Bank of America Corporation we know today) introduced its first credit card, the BankAmericard in Fresno, CA. (See Ex. 1) The BankAmericard was revolutionary in that it was the first consumer card to be accepted universally. It is informally known as the first credit …show more content…
First credit card companies had to convince retail businesses. When retail stores realized that they did not have to get rid of their store retail credit cards they already had and accepting all-purpose credit cards would increase spending in their stores, they were an easy sale. Second, technology made the transaction process much more practical and efficient.
Companies have a variety of reasons why they may want to go public. Going public helps a company raise funds, it maximizes the company’s shareholder value, and it increases company awareness. Going public also comes with downfalls. The process is expensive. Companies can expect to pay anywhere from $250,000 to $1 million even if the offering does not get completed. The process is very time consuming for everyone especially executives. Once public, there is constant pressure to increase earnings. Also, public companies are under strict compliance laws under SEC regulations and Sarbanes Oxley. These problems and more can be a heavy burden for a newly growing company. There was a renewed interest for companies to go public during the mid to late 1980’s under the economic boom of the “Reagan Revolution.” This slowed down during the recession of 1987 and then there was a boom again for most of the 1990’s during the Clinton Era. The Dot com bust of the 2000’s, the September 11th attacks in 2001, and then an economic …show more content…
Its business model is designed to benefit everyone involved; customers, vendors, banks, and card issuers. Their profit margin is 44% and their operating margin is 62%. Visa also has a very low debt to equity ratio of around 35%. For the month of April 2014 from Visa’s quarterly 10Q, its total liabilities were $9.968 billion and its total shareholder equity was $27.295 billion for a debt equity ratio of 36.52%. The numbers from Visa’s 2013 annual 10K are similar at 33.81%. Investors looking to invest with Visa would find a stable investment for long term investment. Visa shares are one of the highest. Visa as a public company is new but is setting trends by which economist base some of their analysis on. As the world economy shifts towards a more digital and electronic forms of payment, Visa is confirming itself as the industry leader in which others base their models.
References
Boorstin, Daniel, (N.D.) Credit History: The Evolution of Consumer Credit in America
Bootin, Jennifer, (June 18, 2014) Report: Russia to Lower Requirements of Visa, Mastercard, Fox Business News, Retrieved from: http://www.foxbusiness.com/industries/2014/06/18/report-russia-to-lower-requirements-visa-mastercard/
St. James Press, 1999, Visa International History, Funding Universe, International Directory of Company Histories, Vol. 26.