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25 Cards in this Set
- Front
- Back
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What are the four basic areas of finance?
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-Corporate finance
-Investments -Financial institutions -International finance |
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Why study finance?
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Marketing, accounting, management, and personal finance
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What are three important questions answered using finance?
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1. What long-term investments hould you take on?
2. Where will you get the long-term financing to pay for your investment? 3. How will you manage your everyday financial activities? |
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The top financial manager within a firm is usually the ____ _____ ______.
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Chief Financial Officer
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Oversees taxes, cost accounting, financial accounting, and data processing.
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Controller
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Oversees cash management, credit management, capital expenditures, and financial planning.
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Treasurer
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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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The mixture of debt and equity maintained by a firm.
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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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A business owned by a single individual. Owner keeps all the profits, but has unlimited liability for business debts. Limited to the owner's life span.
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Sole Proprietorship
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A business formed by two or more individuals or entities. Advantages and disadvantages are the same as for a proprietorship. A written agreement is very important.
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Partnership
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What are the primary disadvantages of sole proprietorships and partnerships?
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1. Unlimited liability for business debts on the part of the owners.
2. Limited life of gthe business. 3. Difficulty of transferring ownership. |
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A business created as a distinct legal entity owned by one or more individuals or entities. Forming one involves preparing articles of incorporation and a set of bylaws.
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Corporation
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What are the advantages of a corporation?
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-Ownership can be readily transferred, so the life of the corporation is not limited.
-Liited liability for business debts -Unlimited life of the business |
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What are the disadvantages of a corporation?
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-It must pay taxes since it's a legal entity.
-Double taxation |
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What is the goal of financial management?
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THe goal fo finacnial management is to maximize the current value per share of the existing stock.
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What is the appropriate goal when the firm has no traded stock?
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Maximize the market value of the existing owners' equity.
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Intended to strengthen protecftion against orporate accounting fraud and financial malpractice. Contains a number of requirements designed to insure that companies tell the truth in their financial statements.
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Sarbanes-Oxley Act
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The relationship between stockholders and management is called an ______ ______.
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agency relationship
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The possibility of conflict of interest bgetwen the owners and management of a firm.
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agency problem
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In this market, the corporation is the seller, and the transaction reaises money for the corporation. They engage in public offerings and private placements.
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Primary markets
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Involves one owner or creditor selling to another. Provides the means for transferring ownership of corporate securities.
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Secondary markets
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Auction markets differ from deal markets in what two ways?
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1. An auction market has a physical location (Wall Street)
2. In a dealer market, most of the buying and selling is done by the dealer. |
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Dealer markets in stocks and long-term debt are called _____ ___ _______ markets. No central location, all done electronically.
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over the counter
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Stocks that trade on an organized excahnge (or market) are said to be ______ on that exchange. Firms must meet certain minimum criteria concening asset size and number of shareholders.
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listing
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