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14 Cards in this Set
- Front
- Back
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Sole proprietor |
single owner of a business |
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Partnership
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business owned jointly by 2 or more individuals, share profits, jointly responsible for losses
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Company/corporation
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organization legally allowed to trade/produce, have limited liability, liability of the company is limited to the value of the company’s assets
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Shareholder
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individuals who invest in company —> therefore, owner
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Dividends
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payments made from after tax profits to shareholders
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Retained earnings
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profits retained for reinvestment, not distributed in dividends
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Capital gain
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income resulting from selling shares @ P > than original
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Real return
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Nominal Rate of return = rate of inflation
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Principal-agent relationship
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management (agent) is different from ownership (principal)
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Principal-agent problem
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if principal cannot monitor actions of agent, the agent may not act in best
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Risk-averse person
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prefers to avoid risk, choose to bet/gamble only if odds are in favor *avoid fair game/fair gamble, Diminishing marginal utility
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Risk-neutral person
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only interested when odds yield a profit
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Risk-lover person
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still would try luck
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Risk pooling
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aggregate independent risks to make the aggregate less uncertain
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