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21 Cards in this Set
- Front
- Back
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The Valuation Principle |
Values of assets are decided by competitive market price. |
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Sole-Proprietorship |
business ran and owned by one person. Owner is liable for company |
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Partnership |
business ran by multiple owners. All partners are liable for debt. |
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Limited Liability Company |
Limited partnership but without a general partner. Every owner is limited and has power to run the business. |
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Corporation |
legally defined artificial being, separate from its owners. State must give consent. Owned by shareholders. |
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S Corporations vs. C corporations |
S - have no corporate tax rate on profit, but a higher tax rate on personal tax. Has to have fewer than 100 owners. C - doubled tax, all types of owners. |
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Investment Decision (Capital Budgeting) |
Determining which real asset the firm should acquire |
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Financing Decision (Capital Structure) |
Raising money to acquire real assets |
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Real Assets |
Tangible: Inventory, Plant, Machinery, Office Intangible: Technical Expertise, patents, trademarks |
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Financial Assets |
Bank Loans, Bonds, Shares of Stock, Securities |
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Primary Market |
The initial Sale of securities from the firm to the investor. (IPO) |
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Secondary Market |
Trading of securities among investors Exchange Markets: NYSE Amex OTC: NASDAQ |
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Cost Benefit Analysis |
If benefits exceed the cost of benefits, value is created. The best way to compare goods is cash now. |
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Time Value of Money |
The difference in the value of money today and money in the future. |
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Net Present Value |
The difference between the present value of benefits and the present value of its costs. |
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The Law of One Price |
same things will have same price in competitive market |
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Arbitrage |
buying and selling equivalent goods to take advantage of price difference |
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Perpetuity |
A stream of equal payments received at regular intervals forever. |
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Annuity |
A stream of equal payments received at regular intervals for a set number of periods. Identical payments. |
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Growing Perpetuity |
a stream of cash flows that grows at a constant rate forever. |
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Growing Annuity |
a stream of cash flows growing at a constant rate and paid at regular intervals, end on a specific number. |
