Finc-318 Chapter 1

Front 1

A business owned by a single individual:

Back 1

Sole proprietorship

Front 2

Area of financial management concerned w/ the capital structure of the firm and the amount of long-term debt and equity used by the firm:

Back 2

Capital structure (long-term financing)

Front 3

What kind of partnership has 2 different kinds of partners?

Back 3

Limited partnership

Front 4

The ____ of large corporations are generally not involved in the day-to-day operations of the firm. ____ make decisions on their behalf.

Back 4

Stockholders, managers

Front 5

A partnership in which all partners share and have unlimited liability for the firm’s debts:

Back 5

General partnership

Front 6

A legal entity created by the state, separate and distinct from its owners, w/ rights and privileges of an actual person:

Back 6

Corporation

Front 7

Area of financial management concerned w/ short-term assets and liabilities:

Back 7

Working capital management (short-term financing)

Front 8

Conflicts of interest between stockholders and management:

Back 8

Agency problem

Front 9

Partners in a limited partnership who run the business and have unlimited liability:

Back 9

General partners

Front 10

What are the 4 basic areas of finance?

Back 10

1) Corporate finance
2) Investments
3) Financial institutions
4) International finance

Front 11

Process of planning and managing a firm's long-term investments:

Back 11

Capital budgeting

Front 12

A business formed by two or more co-workers:

Back 12

Partnership

Front 13

Partners in a limited partnership who are silent on operations and have limited liability:

Back 13

Limited partners

Front 14

What are the 3 types of financial management decisions?

Back 14

1) Capital budgeting
2) Capital structure
3) Working capital management

Front 15

Area of finance that works with financial assets such as stocks and bonds:

Back 15

Investments

Front 16

Current assets - current liabilities = _______

Back 16

Net working capital (NWC)

Front 17

Area of financial management:

"What long-term investments should the business take on?"

Back 17

Capital budgeting

Front 18

Companies that specialize in financial matters:

Back 18

Financial institutions

Front 19

Who is the top financial manager within a firm?

Back 19

Chief Financial Officer (CFO)

Front 20

What organization is easiest to start, and the least regulated?

Back 20

Sole proprietorship

Front 21

Employed to manage money for investors:

Back 21

Portfolio manager

Front 22

Who oversees taxes, cost accounting, financial accounting, and data processing in a firm?

Back 22

Controller

Front 23

Area of finance that takes place outside U.S. borders:

Back 23

International finance

Front 24

What are 3 disadvantages of a corporation?

Back 24

1) Separation of ownership and management (agency costs)
2) Double taxation
3) Highly regulated

Front 25

Employed to advise customers on investments:

Back 25

Stockbroker or financial advisor

Front 26

What organization is taxed once as personal income?

Back 26

Sole proprietorship

Front 27

Area of finance that studies the value of financial assets, risk versus return, and asset allocation:

Back 27

Investment

Front 28

Employed to research individual investments:

Back 28

Security analyst

Front 29

Who oversees cash management, credit management, capital expenditures, and financial planning in a firm?

Back 29

Treasurer

Front 30

What are 2 disadvantages of a sole proprietorship?

Back 30

1) Unlimited liability
2) Difficult to sell ownership interest

Front 31

What are the 3 things that the manager (agent) of a firm wants?

Back 31

1) low risk
2) bigger firm
3) perks

Front 32

Market in which securities are bought and sold after their initial sale:

Back 32

Secondary market (issuer is not involved)

Front 33

Key questions in this area of financial management include:

How much inventory should we carry?

When should we pay suppliers?

Back 33

Working capital management

Front 34

What organization has limited liability and an unlimited life?

Back 34

Corporation

Front 35

What are the 2 types of secondary markes?

Back 35

1) dealer markets
2) auction markets

Front 36

What 2 things does the stockholder (principal) want?

Back 36

1) high stock prices
2) greater risk (more diversified)

Front 37

Disadvantages of this organization include:

-Difficult to transfer ownership
-Difficult to raise large sums of capital

Back 37

Partnership

Front 38

Market that involves the original sale of securities:

Back 38

Primary market (issuer involved)

Front 39

Key questions in this area of financial management include:

How should we pay for our assets?

Should we use debt or equity?

Back 39

Capital Structure

Front 40

This person does NOT want the firm to be diversified:

Back 40

Manager (agent)

Front 41

Advantages of this organization include separation of ownership and management and the easy transfer of ownership:

Back 41

Corporation

Front 42

ACCT vs. FINC

Focused on stock price maximization

Back 42

Finance

Front 43

Key questions in this area of financial management include:

How do we manage the day-to-day finances of the firm?

Who should we sell to on credit and under what terms?

Back 43

Working capital management

Front 44

Advantages of this organization include increased efficiency and no limit on size:

Back 44

Corporation

Front 45

ACCT vs. FINC

Past-looking

Back 45

Accounting

Front 46

ACCT vs. FINC

Focused on profit maximization

Back 46

Accounting

Front 47

What is the goal of financial management?

Back 47

Maximize the current value of the company's stock

Front 48

ACCT vs. FINC

Forward-looking

Back 48

Finance

Front 49

Sole proprietorships and partnerships both have _____ liability.

Back 49

Unlimited (disadvantage for both)

Front 50

What are the 4 mechanisms for minimizing agency costs?

Back 50

1) compensation structure
2) board of directors
3) institutional investors/large shareholders
4) threat of takeover