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13 Cards in this Set
- Front
- Back
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List and Describe 4 Basic Areas of Finance
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1. Corporate Finance
2. Investments 3. Financial institutions 4. International finance |
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What is Corporate Finance?
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Business or managerial finance. involves managing a corp. Objective is to Maximize shareholders wealth.
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What is investments?
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Work w/financial assets (stocks/bonds), value of financial asests, risk versus returns and asset allocation.
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What is Financial institutes?
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Companies that specialize in financial matters (banks, insurance companies, and brokerage firms). Money is transfered from a surplus unit to the deficit unit through process called intermediation.
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What is international finance?
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Incorp each of the 4 ares of finance, need to be familiar w/exchange rates and political risk. Need to understand customs of other countries & speaking a foreign lang. fluently is also helpful.
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What is profit maximization?
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shouldn't strive to max. profit in short-run. it would defer maintenance & lets inventories run don. "long-run" or "average profits"
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What is the agency problem?
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Agency relationship-stockholder/owners of a firm appoint leaders to run firm & act in best interest to increase shareholder wealth. The possibility of conflict of interest btwn owners & management of a firm.
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What is working capital?
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A firm's short-term assets and liabilities.
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Advantages/Disadvantages of Sole Proprietorship are..
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Adv- easy to start, least regulated, single owner keeps all profits, and taxed once as personal income.
Disad- limited to life of owner, equity cap limited to owner's personal wealth, unlimited liability, and diff to sell ownership interest. |
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Advantages/Disadvantages of Partnership are..
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Adv- 2 or more owners, more capital available, relatively easy to start, and income taxed once as personal inc.
Disadv- Unlimited liability (general and limited), partnership dissolves when one partner dies or wishes to sell, and diff to transfer ownership. |
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What is the difference between general and limited partnerships?
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Gen- all partners share gain/loss and all have unlimited liability for all partnership debts. Lim- 1 or more partners will run business and have unlimited liability, but there will be one or more limited partners who don't actively participate in business.
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What are the 4 types of markets?
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Primary, Secondary, Money, and Capital
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How are organizations set up?
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Prepare articles of incorporation, and set of bylaws. stockholders elect board of directors who select managers.
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