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13 Cards in this Set

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List and Describe 4 Basic Areas of Finance
1. Corporate Finance
2. Investments
3. Financial institutions
4. International finance
What is Corporate Finance?
Business or managerial finance. involves managing a corp. Objective is to Maximize shareholders wealth.
What is investments?
Work w/financial assets (stocks/bonds), value of financial asests, risk versus returns and asset allocation.
What is Financial institutes?
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.
What is international finance?
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.
What is profit maximization?
shouldn't strive to max. profit in short-run. it would defer maintenance & lets inventories run don. "long-run" or "average profits"
What is the agency problem?
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.
What is working capital?
A firm's short-term assets and liabilities.
Advantages/Disadvantages of Sole Proprietorship are..
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.
Advantages/Disadvantages of Partnership are..
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.
What is the difference between general and limited partnerships?
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.
What are the 4 types of markets?
Primary, Secondary, Money, and Capital
How are organizations set up?
Prepare articles of incorporation, and set of bylaws. stockholders elect board of directors who select managers.