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67 Cards in this Set
- Front
- Back
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finance
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that art and science of managing money
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financial services
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the area of finance concerned with the design and delivery of advice and financial products to individuals business and government
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managerial finance
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concerns the duties of the financial manager in the business firm
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financial manager
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actively manages the financial affairs of any type of business
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stockholders
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the owners of a corporation whose ownership or quity is evidenced by either common stock or preferred stock
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common stock
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the purest and most basic form of corporate owndership
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dividends
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periodic distributions of earnings to the stockholders of a firm
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board of directors
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Group elected by the firms stockholders and typically responsible for developing strategic goals and plans setting general policy guiding corporate affairs approving major expenditures and hiring firing compensating and monitoring key officers and executives
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CEO
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Corporate official responsible for managing the firms day to day operations and carrying out the policies established by the board of directors
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Tresasurer
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The firms chief financial manager who is responsible for the firms financial activities such as financial planning and fundraising making capital expenditure decisions and managing cash credit the pension fund and foreign exchange
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controller
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the firms chief accountant who is responsible for the firms accounting activities such as corporate accounting tax management financial accounting and cost accounting
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foreign exchange manager
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the manager responsible for monitoring and managing the firms exposure to loss from currency fluctuations
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marginal cost benefit analysis
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economic principle that states that financial decisions should be made and actions taken only when the added benefits exceed the added costs
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accrual basis
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in preparation of financial statements recognizes revenue at the time of sale and recognizes expenses when they are incurred
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cash basis
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recognizes revenues and expenses only with respect to actual inflows and outflows of cash
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EPS
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the amount earned during the period on behalf of each outstanding share of common stock calculated by dividing the periods total earnings available for the firms common stockholders by the number of shares of common stock outstanding
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risk
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the chance that actual outcomes may differ from those expected
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stake holders
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Groups such as employees customers suppliers creditors owners and others who have a direct economic link to the firm
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corporate governance
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The system used to direct and control a corporation. Defines the rights and responsibilities of key corporate participants decision making procedures and the way in which the firm will set achieve and monitor its objectives
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individual investors
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investors who buy relatively small quantities of shares so as to meet personal investment goals
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Institutional investors
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investment professionals such as banks insurance companies mutual funds and pension funds that are paid to manage other peoples money and that hold and trade large quantities of securities
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Sarbanes Oxley act 2002
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An act aimed at eliminating corporate disclosure and conflict of interest problems. Contains provisions about corporate financial disclosures and the relationships among corporations analysts auditors attorneys directors officers and shareholders
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business ethics
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standards of conduct or moral judgment that apply to persons engaged in commerce
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agency problem
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the likelihood that managers may place personal goals ahead of corporate goals
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agency costs
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the costs borne by stockholders to maintain a corporate governance structure that minimizes agency problems and contributes to the maximization of owner wealth
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incentive plans
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management compensation plans that tend to tie management compensation to share price the most popular incentive plan involves the grant of stock options
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stock options
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an incentive allowing managers to purchase stock at the market price set at the time of the grant
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performance plans
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plans that tie management compensation to measures such as EPS growth in EPS and other ratios of return. Performance shares and or cash bonuses are used as compensation under these plans
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performance shares
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shares of stock given to management for meeting stated performance goals
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cash bonuses
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cash paid to management for achieving certain performance goals
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Financial Institution
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An intermediary that channels the savings of individuals businesses and governments into loans or investments
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Financial Markets
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Forums in which suppliers of funds and demanders of funds can transact business directly
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private placement
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the sale of a new security issue typically bonds or preferred stock directly to an investor or group of investors
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public offering
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the nonexclusive sale of either bonds or stocks to the general public
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primary market
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financial market in which securities are initially issued the only market in which the issuer is directly involved in the transaction
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secondary market
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financial market in which preowned securities (those that are not new issues) are traded.
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money market
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A financial relationship created between suppliers and demanders of short term funds.
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Marketable Securities
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Short term debt instruments such as us treasury bills commercial paper and negotiable certificates of deposit issued by government business and financial institutions repectively
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Eurocurrency Market
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International equivalent of domestic money market
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capital market
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a market that enables suppliers and demanders of longterm funds to make transactions
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bond
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long term debt instrument used by business and government to raise large sums of money generally from a diverse group of lenders
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preferred stock
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a special form of ownership having a fixecd periodic dividend that must be paid prior to payment of any dividends to common stockholders
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broker market
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The securities exchanges on which the two sides of a tranzaction the buyer and seller are brought together to trade securities.
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securities exchanges
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organizations that provide the marketplace in which firms can raise funds through the sale of new securities and purchasers can resell securities.
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dealer market
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the market in which the buyer and seller are not brought together directly but instead have their orders executed by securities dealers that make markets in the given security
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market makers
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securities dealers who make markets by offering to buy or sell certain securities at stated prices
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nasdaq market
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an all electronic trading platform used to execute securities trades.
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OTC market
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market where small unlisted securities are traded
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bid price
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the highest price offered to purcahse a security
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ask price
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the lowest price at which a security is offered for sale
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efficient market
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a merket that allocates funds to their most productive uses as a result of competition among wealth maximizing investors that determines and publicizes prices that are believed to be close to their true value
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ordinary income
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income earned through the sale of a firms goods or services
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average tax rate
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a firms taxes divided by its taxable income
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marginal tax rate
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the rate at whcih additional income is taxed
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double taxation
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occurs when the already once taxed earnings of a corporation are distributed as cash dividends to stockholders who must pay taxes of up to a maximum rate of 15 percent on them
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capital gain
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the amount by which the sale price of an asset exceeds the asstes initial purchase price.
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income statement
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provides a financial summary of the firms operating results during a specified period
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dividend per share
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the dollar amount of cash distributed during the period on behalf of each outstanding share of common stock
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balance sheet
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summary statement of the firms financial position at a given point in time
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current assets
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short term assets expected to be converted into cash within 1 year or less
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current liabilities
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short term liabilities expected to be paid within 1 year or less
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statement of stockholders equity
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shows all equity account transactions that occurred during a given year
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statement of retained earnings
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Reconciles the net income earned during a given year and any cash dividends paid with the change in retained earnings between the start and the end of that year
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statement of cash flows
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provides a summary of the firms operating investment and financing cash flows and reconciles them with changes in its cash and marketable securities during the period
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cross sectional analysis
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comparison of different firms financial ratios at the same point in time involves comparing the firms ratios to those of other firms in its industry or to industry averages
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benchmarking
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a type of cross sectional analysis in which the firms ratio values are compared to those of a key competitor that it wishes to emulate
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lquidity
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a firms ability to satisfy its short term obligations as they come due
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