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28 Cards in this Set
- Front
- Back
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Sole proprietorship
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a. Avoids corporate taxes, taxed at personal income
b. Unlimited liability c. Hard to raise capital d. Life limited to the owner e. Avoids Government Regulations |
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Partnership
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General Partners
Limited Partners: Lose how much you invest in |
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Corporation
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f. Owners are separate from managers
g. Requires a lot of administrative paper work to form (bylaws) h. Shares(ownership)are easily transferable i. Corporate taxes j. Easy to Raise Funds k. Life is not limited to stockholders l. Disadvantage: Double taxation m. Disadvantage: A lot of Government regulations |
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LLC
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(Limited Liability Company)= operate and to be taxed like a partnership but retain limited liability for its owners
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Goal of a firm of management is to?
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Maximize Stock Price
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Conflict of interest in share holders and management is what?
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Relationship is called an agency relationship
Managerial Compensation, Control of the Firm, and Conclusion
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Primary Market
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1. Public Offering: Registered with SEC and sold to institutions and investors
2. Private Placement: Dont have to be registered and sold to private investors. |
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Secondary Market
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Security is sold (traded)from investor to investor
i. Two types: 1. Dealer Market: Dealer puts up own capital to buy securities then sell them over the counter (no location) 2. Auction Market: Buy or sell at price at auction has physical location (ex. NYSE) |
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Which market is considered an auction market
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Wallstreet
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Double Taxation for corporations means?
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Getting taxed twice
at the time when you pay taxes then if the company holds stock, the dividends are also taxed
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3 disadvantages of a corporate organization?
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Double taxation, Govt regulations...
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Difference between Income Statement, cash flow statement, Balance sheet is?
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Current Assets
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What is a current assets?
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Has a life less than one year and it will normally convert to cash within 12 months
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Networking capital is?
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Difference between a firms current assets and its current liabilities. + is good
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How to calculate average and marginal tax rate different?
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Tax bill/taxable income
extra tax you would pay if you earned one more dollar. Page 31
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Cash flow from assets is also known as what?
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Operating cash flow, capital spending, and change in net working capital
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Earning per share is what?
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Net income/total shares outstanding
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Balance sheet Assets are what
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Current or fixed
on left side
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Which is not needed for operating cash flow?
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Expenses associated with the firms financing of its assets are not included since they are not operating expenses. (taxes)
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Which is not considered a component of stock holders equity?
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a. Assets
i. Current ii. Fixed b. Liabilities i. Current ii. Long term |
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What Quick Ratio:
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Current Assets- Inventory/Current Liabilities
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What is Current Ratio
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Current Assets/Current Liabilities
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What type of Ratio is financial leverage?
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Shareholders Equity= Assets-Liabilities
Higher the debt, the greater its degree of financial leverage |
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Equation for Total Turnover
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Cost of goods sold/ Inventory
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ROE/(3 things?) what is it called?
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Return on Equity= Net Income/Assets * Assets/Total Equity
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5 Ratios
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which ratio can be calculated using only the income statement
Assets are never on income statement
no equity
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Diff. between compound interest, simple interest, annual, interest on interest.
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CI=interest earned on both the initial principal and the interest reinvested from prior periods
SI=Interest earned only on the original principal amount invested IonI=Interest earned on the reinvestment of previous interest payments AI=Every year |
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Formula for present value interest factor?
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FV (1/((1+r)^t))
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