Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
financial management
ch 1
| Question | Answer |
|---|---|
| it developed the notion that an asset's value is based on the future cash flows the asset will provide | Economics |
| is the top governing body | board of directors |
| the highest ranking individual | chair person |
| firm's president | COO chief operating officer |
| he/she directs the firm's operations which include marketing, manufacturing, sales, and other operating departments. | COO chief operating officer |
| a senior vice president and the third ranking officer, is in charge of accounting, financing, credit policy, decisions regarding asset acquisitions, and investor relations, which invloves communications with stockholders and the press | CFO |
| act that was passed by congress in the wake of a series of corporate scandals involving now defunct companies such as enron and Worldcom, where investors, workers, and suppliers lost billions of dollars due to false information released by those companie | Sarbanes-Oxley Act |
| three areas of finance | 1. financial management 2. Capital markets 3. Investments |
| also called corporate finance | financial management |
| functions of financial management | - focuses on decisions relating to how much and what types of assets to acquire, how to raise the capital needed to purchase assets, and how to run the firm so as to maximize its value. |
| markets where interest rates, along with stock and bond prices are determined | capital market |
| it regulates banks and controls the supply of money | Federal Reserve system |
| it regulates the trading of stocks and bonds in public markets, are also studied as part of capital markets | SEC |
| decisions concerning stocks and bonds and include a number of activities | investments |
| no. of activities included in investments | 1. security analysis 2. portfolio theory 3. market analysis |
| it deals with finding the proper values of individual securities | security analysis |
| it deals with the best way to structure portfolios, or "baskets", of stocks and bonds. | portfolio theory |
| it deals with the issue of whether stock and bond markets at any given time are "too high," "too low" or "about right"/ | market analysis |
| investor psycholofy is examined in an effort to deremine if stock prices have been bid up to unreasonable heights in a speculative bubble or driven down to unreasonable lows in a fit of irrational pessismism, is a part of market analysis | Behavioral finance |
| forms of business organization | 1. sole proprietorship 2. partnership 3. corporations 4. limited liability companies (llcs) 5. limited liability partnerships (LLPs) |
| an unincorporated business owned by one individual | sole proprietorship |
| advantages of sole proprietorship | 1. easily and inexpensively formed 2. they are subject to few government regulations 3. they are subject to lower incomet taxes than are corporations |
| disadvantages of sole proprietorship | 1. proprietorships have unlimited personal liability for the business' debts, so they can lose more than themount of money they invested in the company. 2. the life of the business is limited to the life of the owner. 3. hard to obtain capital. |
| a legal arrangement between two or more people who decide to do business together. | partnership |
| advantages of partnership | 1. can be established relatively easily and inexpensively. 2. the firm's income is allocated on a pro rata basis to the partners and is taxed on an individual basis which allows them to avoid coroporate income tax |
| disadvantages of partnership | 1. unlimited personal liability 2. if partnership goes bankrupt and a partner is unable to meet his or her pro rata share of the firm's liabilities, the remaining partners will be responsible for making good on the unsatisfied cl |
| a legal entity created by a state, separate and distinct from its owners and managers, having unlimited life, easy transferability of ownership, and limited liability | corporation |
| advantages of corporations | corporation can lose all of its money, but its owners can lose only the funds that they invested in the company. has unlimited lives, is easier to transfer shares of stock in a corporation than one's interest in an unincorporated business.easy raisingcap |
| disadvantage of corporation | corporations earnings are taxed, and then when its after tax earnings are paid out as dividends, those earnings are taxed again as personal income to the stockholders.n |
| which are taxed as if they were partnerships, and help corporation exempt from the corporate income tax | S corporation |
| to qualify for S corporation status, a firm can have no more than ------- stockholders limiting their use to relatively small privately owned firms | 100 stockholders, |
| larger corporations are known as | C corporation |
| a relatively new type of organization that is a hybrid between a partnership and a corporation. | limited liability company (llc) |
| is similar to LLC ; are used for professional firms in the fields of accounting, law , and architecture. | LLP |
| it has limited liability like corporation but is taxed like partnerships | LLP |
| the time and effort it takes to sell the asset for cash at a fair market value | liquidity |
| thr primary goal for managers of publicly owned companies implies that decisions whould be made to maximize the long run value of the firm's common stock. | shareholder wealth maximization |
| principal task of finance department | to evaluate proposed decisions and judge how they will affect the stock price and thus shareholder wealth. |
| the present value of the steram of cash flows that the asset provides to its owers over time | the value of an asset |
| an estimate of a stock's true value based on accurate risk and return data. | intrinsic value |
| the intrinsic value can be estimated but not measured precisely | True |
| the stock value based on perceived but possibly incorrect information as seen by the marginal investor | market price |
| an investor whose views dermine the actual stock price | marginal investor |
| the situation in which the actual market price equals the intrinsic value, so investors are indifferent between buying or selling a stock. | equilibrium |
| management s goal should be to take actions designed to maximize the firm's intrinsic value, not its current market price | true |
| maximizing the intrinsic value will | maximize the average price over the long rn, but not necessarily the current price at each point in time. |
| the way the top managers operate and interface with stockholders | corporate governance |
| an individual who targets a corporation for takeover because it is undervalued | corporate raider |
| The acquisition of a company over the opposition of its management | hostile takeover |
Created by:
100002456119902