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37 Cards in this Set
- Front
- Back
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Accounting |
The field of knowledge that provides a financial manager with much of the language of finance and with financial data |
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Agency Theory |
This theory examines the relationship between the owners of the firm and their agents, the managers of the firm. Does management act in the best interests of shareholders? |
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Asymmetric information |
An imbalance of pertinent information among investors and the management of firms can affect pricing in financial markets. |
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Auction Market |
A location where trading takes place in an open transparent manner all buyers and sellers have access to security prices |
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Behavioural Finance |
The study of psychological and sociological influences on financial decision making |
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Capital Budgeting Analysis |
The objective evaluation of long run decisions to invest the firm's scarce resources |
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Capital Budgeting Decisions |
One of three main decision areas of finance related to the acquisition of capital assets to create value for the firm |
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Capital Market |
Competitive markets for equity securities or debt securities with maturities of more than one year. The best examples of capital market securities are common stock, bonds and preferred stocks. |
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Capital Structure Decisions |
One of the three main decision areas of finance related to the combination of debt and equity used by the firm |
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Capital Structure Theory |
The study of the relative importance of debt and equity in financing a firm. Early development of this story was by Modigliani and Miller |
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Consumer Pricing Index (CPI) |
An economic indicator published monthly by Statistics Canada. It measures the rate of inflation for consumer goods. |
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Corporate Financial Markets |
Markets in which corporations, in contrast to government units, raise funds. |
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Corporation |
A form of ownership in which a separate legal entity is created. A corporation may sue or be sued, engage in contracts and acquire property. It has a continual life and is not dependent on any one shareholder for maintaining its legal existence. A corporation is owned by shareholders who enjoy the privilege of limited liability. There is, however the potential for double taxation in the corporate form of organization, in the first time at the corporate level in the form of profits and again at the shareholder level in the form of dividends. |
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Dealer Market |
A place where securities are sold out of the inventory of institutions by way of negotiation |
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Disinflation |
A leveling off or slowing down of price increase |
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Economics |
The field of knowledge encompassing the
workings of the economy, industries and businesses and the models that try to explain how value is created providing a structure for decision making |
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Financial Capital |
Financial claims on a firm or government, as
opposed to real capital such as the plant and equipment |
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Financial Markets |
The place of interaction for people, corporations and institutions that either need money or have money to lend or invest |
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Fiscal Deficit |
Government expenditures are greater than government tax revenues and the government must borrow to balance revenues and expenditures. These deficits act as an economic stimulus |
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General Partnership |
A partnership in which all partners have unlimited liability for the debts of the firm. |
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Inflation |
The phenomenon of price increase with the passage of time. |
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Insider Trading |
Occurs when someone has information that is not available to the public and the uses this information to profit from trading in a company's common stock |
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Institutional Investors |
Large investors such as pension funds and mutual funds |
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Limited Partnership |
A special form of partnership to limit liability for most of the partners. Under this arrangement, one or more partners are designated as general partners and have unlimited liability for the debts of the firm, while the other partners are designated as limited partners and are liable only for their initial contribution. |
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Market Efficiency |
Markets are considered to be efficient when 1] Prices adjust rapidly to new information 2] there is a continuous market in which each successive trade is made at a price close to the previous price (the faster the price responds to new information and the smaller the differences in price changes, the more efficient the market) 3] The market can absorb large dollar amounts of securities without destabilizing prices |
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Market Determined Share Price |
The amount investors are willing to pay for their shares of a firm on a basis of trading in the capital market |
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Money Markets |
Competitive market for securities with maturities of one year or less. The best examples of money market instruments would be Treasury Bills, Commercial paper and banker's acceptances. |
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Partnership |
A form of ownership in which two or more partners are involved. Like the sole proprietorship, a partnership arrangement carries unlimited liability for the owners. However, there is only single taxation for the partners, an advantage over the corporate form of ownership. |
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Present Value Model |
The determination of the value of assets based on their future "expected" cash flows |
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Primary Market |
Initial sale of corporate securities to investors when a corporation raises capital |
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Prime Rate |
The rate a bank charges its most credit worthy customers |
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Public Financial Markets |
Markets in which federal, provincial and municipal governments raises money for public activities |
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Real Capital |
Physical assets such as plant and equipment |
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Secondary Market |
The market for securities that have already been issued. It is a market in which investors trade back and forth with each other |
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Shareholder Wealth Maximization |
Maximizing the wealth of the firm's shareholders through achieving the highest possible value for the firm in the marketplace. It is the overriding objective of the firm and should influence all decisions |
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Sole Proprietorship |
A form of organization that represents single person ownership and offers the advantages of simplicity of decision making and low organization and operating costs. |
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Working Capital Decision |
One of the three main decision areas in finance related to managing current assets and liabilities |
