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36 Cards in this Set
- Front
- Back
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the process of planning and managing a firm's long-term investments
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capital budgeting
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Ex: Financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire
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capital budgeting
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the mixture of debt and equity maintained by a firm
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capital structure
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Ex: Financial manager has to decide exactly how and where to raise the money
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capital structure
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a firm's short-term assets and liabilities
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working capital
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Ex: Managing this is a day-to-day activity that ensures the firm has sufficient resources to continue its operations and avoid costly interruptions
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working capital
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responsible for managing the firm's cash and credit, its financial planning, and its capital expenditures
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treasurer
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handles cost and financial accounting, tax payments, and management information systems
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controller
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a business owned by a single individual
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sole proprietorship
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Advantage of Sole Proprietorship?
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Keeps all the profits
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3 Disadvantages of Sole Proprietorships and Partnerships?
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1. Unlimited liability for business debts
2. Limited life of the business 3. Difficulty of transferring ownership |
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a business formed by two or more individuals or entities
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partnership
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Advantage of a Partnership?
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Easy and inexpensive to form
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a business created as a distinct legal entity owned by one or more individuals or entities
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corporation
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3 Advantages of Corporations?
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1. Ease of transferring ownership
2. Limited liability for business debts 3. Unlimited life of the business |
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Disadvantage of Corporation?
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Double Taxation
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Includes the corporation's name, its intended life, its business purpose, and the number of shares that can be issued
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articles of incorporation
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rules describing how the corporation regulates its own existence
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bylaws
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Ex: Describe how directors are elected
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bylaws
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Goal of a corporation?
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Maximize the current value per share of the existing stock
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Makes management personally responsible for the accuracy of a company's financial statements
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Sarbanes-Oxley Act of 2002
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relationship between stockholders and management
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agency relationship
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An agent represents this person's interests
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principal
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This person is hired to represent a principal's interests
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agent
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the possibility of conflict of interest between the owners and management of a firm
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agency problem
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those who own stock in a company
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stockholders
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Ex: You might hire this person to sell a car that you own while you are away at school
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agent
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Someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm
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stakeholder
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Ex: Employees, customers, suppliers, and even the government
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stakeholders
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usually tied to financial performance in general and often times to share value in particular
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managerial compensation
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Ex: Managers are frequently given the option to buy stock at a fixed price
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managerial compensation
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Control of the firm ultimately rests with?
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stockholders
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the original sale of securities by governments and corporations
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primary market
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securities are bought and sold after the original sale
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secondary market
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dealers buy and sell for themselves and their own risk
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dealer market
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Has a physical location and the primary purpose is to match those who wish to sell with those who wish to buy
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auction market
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