Ch 01: Goals and governance of the corporation Flashcards
Tangible assets ( examples )
Machinery, plant, vehicles, office buildings
Intangible assets (examples )
Brand names, patents
“x” decisions spend money
investment decisions
“x” decisions raise money for the investments
financing decisions
CAPEX = ?
Capital expenditure
capital budgeting or CAPEX is a decision to …
…invest in intangible or tangible assets
Financing decision is a decision on the…
…sources and amounts of budgetting
assets used to provide goods or services are:
real assets
Financial claims to the income generated by the firms’s real assets are:
financial assets
What is a corporation?
A business organized as a separate legal entity owned by stockholders.
limited liability
The owners of a corporation are not personally liable for its obligations.
Who supervises all financial functions and sets overall financial strategy?
CFO ( Chief Financial officer )
Who is responsible for financing, cash management, and relationships with banks and other financial institutions?
Treasurer
Who is responsible for budgeting, accounting and taxes?
Controller
What is the opportunity cost of capital?
The minimum acceptable rate of return on capital investment set by the investment opportunities available to shareholders in financial markets.
Agency problem that might occur:
Managers are agents for the stockholders and are tempted to act in their own interests rather than maximizing value.
What is the agency cost?
Value lost from agency problems or from the cost of mitigating agency problems.
Anyone with a financial interest in the corporation =
A stakeholder
The laws, regulations, institutions, and corporate practices that protect shareholders and other investors.
Corporate governance
