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17 Cards in this Set

  • Front
  • Back
Capital budgeting
the process of planning and managing a firm’s long-term investments
Capital structure (finance structure)
the mixture of debt and equity maintained by a firm
working captial
a firm’s short-term assets and liabilities
Sole proprietorship
a business owned by a single individual (easiest to start & least regulated & most common)
a business formed by two or more individuals or entities
a business created as a distinct legal entity composed of one or more individuals or entities (a legal "person", separate and distinct from its owners. has many of the rights, duties, privileges of an actual person)
Goal of financial management
maximize the current value per share of existing stock (make money or add value for the owners)
Agency problem
the possibility of conflict of interest between the stockholders and management of a firm
someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm
three main corporate finance questions
1. What long-term investments should you take on?
2) Where will you get financing?
3) How will you manage day-to-day financial activities?
financial manager
person in charge of answering main finance questions
controller's office
handles cost and financial accounting, tax payments, management I.S.
treasurer's office
responsible for managing the firm's cash and credit, its financial planning, its capital expenditures
general partnership
all partners share in gains or losses and all have unlimited liability for all partnership debts
limited partnership
one or more general partners run the business and have unlimited liability, but there will be one or more limited partner who will not actively participate in the business (common in real estate ventures)
double taxation
corporate profits are taxed twice (corporation pays taxes and then shareholders pay taxes on dividends)
limited liability company (LLC)
hybrid of a partnership and a corporation (operate and be taxed like a partnership but retain limited liability for owners)