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16 Cards in this Set
- Front
- Back
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Capital Budgeting |
The process of planning and managing a firms long-term investments. |
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Capital structure |
The mixture of debt and equity managing by a firm |
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Working capital |
A firms short-term assets and liabilities. |
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Sole proprietorship |
A business owned by a single individual |
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Partnership |
Business formed by two or more individuals or entities. |
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Corporation |
A business created as a distinct legal entity owned by one or more individuals or entities |
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Sarbanes-Oxley Act |
Better known as "Sarbox," is intended to strengthen protection against corporate accounting fraud and financial malpractice. Officers must review and sign the annual report, and attest that it does not contain false statements or material omissions, and that the financial statement fairly represents the company's financial results. |
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Business Finance |
1. What long - term investments should you take on. Buildings, machinery, equipment, what kind of biz in general. 2. Where will you get the long-term financing to pay for your investments. Borrow or bring in outsiders. 3. How will you manage your everyday financial activities? |
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Agency Problem |
The possibility of conflict of interest between the owners and management of a firm. |
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Most Important Business Decisions |
Size, timing, and risk of future cash flows is essence of capital budgeting. |
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Why corporation is superior when it comes to raising cash |
Unlimited life of company, limited liability of business debts, ease of ownership transfer, and able to sell stock to raise capital. |
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Goal of Financial Management |
Maximize current value per share of existing stock. Maximize the market value of existing owners equity. |
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Proxy Fight |
The mechanism which unhappy stockholders can act to replace existing management. |
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Agency Cost |
If management does not take on a risky investment, which could have had a positive stock impact, hence losing a valuable (but risky) opportunity. |
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Stakeholder |
Someone other than a stockholder or creditor who potentially has a claim on the cash flows of a firm. IE employees, customers, suppliers |
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Primary and Secondary Markets |
Primary : where debt and securities are originally sold from corporations or the government directly to buyers. Secondary: where debt and securities are sold after the original sale. From creditor to creditor for example. |
