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8 Cards in this Set
- Front
- Back
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3 major advantages to incorporating a company
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1) Lowers the risk of liability from the owners - Lower the risk the higher the value
2) Give a company larger growth oppurtuinity becasue it can raise capital through issuing stock 3) The company as a whole is more liquid - Thus more valueable |
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The primary goal for managerial decisions; considers the risk and timing associated with expected earning per share in order to maximize the price of the firm's common stock
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Stockholders Wealth Maximization
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An estimate of a stock's "true" value based on accurate risk and return data.
- can be estimated but not measured precisely. |
Intrinsic Value
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Business Ethics
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A company's attitude and conduct toward its employees. customers, community, and stock holders
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The situation in which the actual market price equals the intrinsic value, so investors are indifferent between buying or selling a stock.
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Equilibrium
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5 Factors that effect stock price
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1.The amount of the future EPS
2.The risk of possible variation in future EPS 3. The timing of EPS 4. The methods of financing the company 5. The amount of earnings paid as dividends |
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Do we assume that firms attempt to maximize shareholder wealth, stock price, earnings, or earnings per share? Why?
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We assume that firms attempt to maximize shareholder wealth, which means maximizing the firm's stock price
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Will both the firms's common stock and the shareholders wealth be maximized when the earnings of th firm are maximized?
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No. Earnings by themselves ignore such important items as:
1) earnings per share 2) dividends, and 3) investors required rates of return given the risk of the firm |
